Retailers Pick n Pay and Spar face an uphill battle to win back consumers as Africa’s biggest grocery retailer, Shoprite, again reported robust sales growth in the six months to end-December.
The group also reported market share gains for 58 months. All its various store formats came to the party with healthy results, save for its furniture business.
Its total merchandise sales rose 14% to a R121bn year on year, boosted partly by “record” Black Friday sales and the festive period. On a like-for-like basis, sales rose 6.3%. While clothing retailers have reported a weak Black Friday, it appears consumers splurged on food.
Shoprite’s SA supermarket sales growth of 14.6% was well ahead of the 5.4% under the category of general dealers as recorded by Stats SA, said Sasfin analyst Alec Abraham. It also indicates they are gaining market share. But Abraham said the healthy results were expected and are already reflected in Shoprite’s R272 share price that rose 3.2% on Tuesday.
The sales momentum was despite the high base of the previous comparable period when sales rose 17.5%. Some of the revenue growth in SA was due to taking over 94 Massmart Rhino and Cambridge grocery and liquor stores after a successful buyout.
Senior equity analyst at M&G investments Damon Buss said the 94 stores acquired from Massmart added 3.4%, or just more than R3.6bn, to the sales. “This boost to earnings growth is welcome, especially when the overall macro environment the business is trading in is so tough.”
The stores add to the scale of Shoprite enhancing its buying power and enabling even better value to be offered to consumers, he said.
“The Massmart stores Shoprite acquired had been run poorly over the past few years and were starved of capital. By spending on improving the look of the store and injecting enough working capital to stock the stores correctly, Shoprite are likely to have radically improved the profitability of these stores.”
At the time, Shoprite CEO Pieter Engelbrecht said the company could run the unprofitable stores much better.
Pick n Pay and Spar unsuccessfully tried to stop the Massmart deal at the Competition Tribunal, and have been proven correct that the buyout has benefited Shoprite.
Much of the growth in sales in the half year is because Shoprite also opened a lot of their own space, said Buss. Shoprite is being quite aggressive in opening new stores, he said, “seemingly taking advantage of the competitors’ current weak positions”.
Even though Shoprite grew same-store sales 6.3%, its prices were increased 7.7%, meaning the same stores sold slightly lower volumes of food than other retailers.
Shoprite remains dominant in the lower-income markets through Shoprite and Usave brands, but its Checkers brand has also been attracting spending from middle- to high-end consumers by leveraging its Sixty60 delivery service to gain more customers, often at the expense of Pick n Pay.
Shoprite and Usave reported sales growth of 13% during the reporting period. Those of Checkers and Checkers Hyper rose 13.7%, boosted by Sixty60 online sales that surged 63.1%.
LiquorShop sales rose 25.2% while the furniture segment, made up of OK Furniture and House & Home, reported an increase in sales of just 1.7% and 0.7% on a same-store basis.
Supermarket sales outside SA rose 20% on a currency-neutral basis.
Shoprite incurred R500m in diesel expense to operate generators across its SA supermarket business during the reporting period.
Update: January 30 2024
This story has been updated with more information.
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