In its latest results presentation to end-June 2024, Shoprite CEO Pieter Engelbrecht kept reiterating the phrase “surprising and delighting our customers”.
He could just as easily have talked about surprising and delighting his shareholders. An amount of R1,000 invested in Shoprite shares at the start of the millennium would be worth about R30,000 now. The only other JSE-listed retailer that approximates that type of outstanding long-term share price appreciation is Clicks.
In a few short decades, Shoprite has become one of, if not the most iconic company in SA. Many former icons such as Pick n Pay have fallen on hard times and others, such as SA Breweries, have largely disappeared. But Shoprite has rarely if ever put a foot wrong and keeps on turning out strong earnings and dividend growth. This is no mean achievement, especially considering its large size (market capitalisation of R168bn).
No other JSE-listed retailer comes remotely close to it in terms of size, but Engelbrecht and his management team aren’t complacent in the slightest. This is a company that never stands still. SAB used to have a saying internally, “if it moves, measure it, if it doesn’t, paint it”. That could equally be applied to Shoprite, with a few tweaks. The company is obsessed with the performance/satisfaction dynamic. It takes the view that if the customers are happy, they’ll keep coming back, no matter the ambient economic circumstances.
For the year to June 30 2024 sales grew 12% to R240.7bn. Like-for-like sales growth, stripping out the effect of new retail space, was 6.3%. Put another way, which highlights just how big Shoprite is, that 12% sales increase was an additional R25.8bn. According to Nielsen IQ, that sales growth was almost twice that of the rest of the market, a universe that included Pick n Pay, Spar, Boxer, Clicks, Woolworths, Dis-Chem, Food Lovers Market, Game, Pep, Kit Kat and OK Foods.
Excluding liquor, Shoprite/Usave contributed R99.6bn of sales, while Checkers contributed R77.9bn. Checkers grew faster than Shoprite/Usave (12.3% vs 10.7%). Little wonder Checkers is regarded as the fastest growing grocery chain in the premium food sector.
The Usave chain grew sales by 13.2% last year and is the star performer in the group, competing directly with Pick n Pay’s Boxer chain. Usave is a true limited assortment discounter, offering a streamlined 1,900 known value items on its shelves, with no frills and cheap prices.
Liquor’s contribution, though relatively small at 8.6% of SA sales, saw growth of 20% year on year. Supermarkets non-RSA grew sales 6.1% to R20.8bn, while OK Furniture had sales growth of 2.3% to R7.2bn.
This is a company that never sits on its laurels. Its radar is always checking for new opportunities, using its finely honed proprietary intellectual property to keep ahead of the pack.
The group is still cagey about divulging specific numbers relating to turnover and profitability at Sixty60, its on-demand home delivery operation. However, sales here rose 58.1% and average delivery time has fallen from 42 minutes in 2022 to 33 minutes last year, with 94.4% of deliveries being on time. This is remarkable.
Trading profit grew 12.4% to R13.4bn and diluted headline earnings per share (HEPS) rose 7.4% to 1,245.2c. The dividend was also increased by 7.4% to 712c. The balance sheet is clean and debt/equity is a comfortable 21.6%, down from 24.3% in 2023.
Shoprite has weathered the poor ambient economy better than most JSE-listed retailers and is nicely poised to participate fully in any improvement arising from a reduction in interest rates, coupled with load-shedding no longer being a problem. The group will continue with its successful strategy of taking market share in virtually all segments of the retail landscape. Its Sixty60 home delivery service is being expanded to include general merchandise in addition to food.
This is a company that never sits on its laurels. Its radar is always checking for new opportunities, using its finely honed proprietary intellectual property to keep ahead of the pack. On a price — earnings ratio of 24 times it’s certainly not cheap. But quality never is.
• Gilmour is an investment analyst.
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