Shoprite shows double-digit sales growth, indicating market share gains

The group’s Checkers and Checkers Hyper segments continue to chase dominance in the premium food space, reporting higher sales growth than competitor Woolworths.
Image: Moneyweb

Africa’s largest supermarket group Shoprite is showing double-digit sales growth, indicating continued market share gains against competitors.

In an operational update released on Thursday, the retailer says total merchandise sales for the six months ended January 2, 2022, rose 10% to R91.1 billion, supported by the continuing good performance of its core South African supermarkets business which achieved 11.3% sales growth during the period.

Shoprite says it was able to achieve this growth despite the impact of the civil unrest last July having an impact on 189 of its stores and costing the company about R1.2 billion in damages.

Much of the riot-related losses and costs are however covered by insurance and business interruption cover.

The group’s upper-market Checkers and Checkers Hyper-branded chain – which has been chipping away at Woolworths’s dominance in the premium food segment – continues to report strong growth with sales increasing 11.4% for the period.

Read: Growth in Woolies Food division slows

This is significantly higher than its main competitor in the premium foods market, Woolworths. Last week Woolworths released its trading update for the 26 weeks ended December 2021, reporting just 3.8% growth in its food business, historically its most resilient segment.

Market share gains

Veteran retail analyst Syd Vianello tells Moneyweb the performance of Shoprite’s Checkers division over the last six months, in comparison to that of Woolworths in the same period, shows that with the addition of new stores to its footprint and its relatively new home delivery service Checkers Sixty60, Checkers is gaining significant market share from one of its biggest competitors.

“I would say the primary reason is they’ve opened a few more stores and more importantly I think Checkers Sixty60 has enabled the shops in their Checkers and Checkers Hyper divisions to make major inroads into the home delivery food market in this country.”

Read: Checkers challenges Woolies head-on in convenience space

The retailer’s Checkers Food Services offering – which serves customers in the catering and hospitality industries and door-to-door consumer deliveries – also registered sales growth, “despite continued Covid-19 lockdown constraints being imposed on its hospitality industry customer base.”

Covid-19 has dealt a big blow to the country’s hospitality sector. The pandemic-induced lockdown restrictions (largely in 2020 and 2021) have imposed harsh limitations to trade for many in the hospitality and entertainment industry.

Furniture segment … 

Shoprite’s furniture segment which contributes 4% to group sales – and is made up of the OK Furniture and House & Home brands – reported a decline in sales of 6.5% for the period.

The furniture segment is coming off a high base seen in the prior year, which was supported by more consumers investing in home improvements during the peak of the Covid-19 lockdown restrictions.

“Whilst the high base from the prior year impacted the whole period, it was more marked during the first quarter which also suffered from the civil unrest directly impacting 35 stores and resulting in a considerable number of adjacent stores being closed,” Shoprite says.

Rest of Africa

Underpinned by strong growth in its Zambian operations, the group’s non-South African operations registered an 11.4% increase in sales in constant currency for the period.

Having discontinued its Kenya, Uganda and Madagascar operations, the group’s rest of Africa segment now spans over 10 African countries, contributing 9.4% to group sales.

Shoprite’s other operating segment – consisting of OK Franchise, Transpharm, Medirite Pharmacies, Checkers Food Services and Computicket – saw improvements, with sales going up by 8.9% for the reporting period.

Vianello says the group’s retail drug businesses – Transpharm and Medirite Pharmacies – are also segments to watch as they continue to report good performance growth, despite the competitiveness of the market at present.

“They are picking up market share in the retail drug business and that’s interesting … Medirite is certainly putting up a fight they are not giving in to Clicks or Dis-Chem,” he adds.

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