Shoprite will con­tinue with its ex­pan­sion

The Mercury - - BUSINESS REPORT - Di­neo Faku

AFRICA’S big­gest food re­tailer, Shoprite, yes­ter­day an­nounced a 6.4 per­cent growth in turnover for the Septem­ber quar­ter, say­ing that it would con­tinue its in­ter­na­tional ex­pan­sion pro­gramme to shore up its base. Shoprite said sales in its South African home surged 8.1 per­cent with the mar­ket record­ing a sharp re­duc­tion in in­ter­nal in­fla­tion to 0.9 per­cent for the quar­ter from the cor­re­spond­ing quar­ter’s 7.2 per­cent.

“This ma­te­rial drop was driven by sig­nif­i­cant price re­duc­tions of many ba­sic com­mod­ity items, such as maize meal and pota­toes, fol­low­ing sup­ply im­prove­ments af­ter the ear­lier drought con­di­tions,” the com­pany said yes­ter­day.

Shoprite said that its non-South African mar­kets had grap­pled with eco­nomic head­winds and re­ported a neg­a­tive turnover growth of -1.8 per­cent “mainly due to the im­pact of lower com­mod­ity prices and the de­pre­ci­a­tion of the cur­ren­cies of the three main coun­tries where the

The group re­mains op­ti­mistic about its op­er­a­tional strength and is mak­ing pos­i­tive progress.

group trades on the con­ti­nent”.

Sales growth in An­gola, in par­tic­u­lar, slowed sig­nif­i­cantly af­ter ex­tra­or­di­nary growth of 110 per­cent in the cor­re­spond­ing quar­ter. An­gola’s ex­tra­or­di­nary growth was pro­pelled by the re­open­ing of the Palanca store in April 2016 af­ter be­ing closed for more than a year due to a fire that caused wide­spread dam­age to it in 2014.

How­ever an­a­lysts yes­ter­day de­scribed the num­bers as slightly be­hind ex­pec­ta­tions, driven by the weaker data from mar­kets across the con­ti­nent. Da­mon Buss, an eq­uity an­a­lyst at Cape Town-based Elec­tus Fund Man­agers, said the num­bers came off a high base.

“We did not ex­pect Shoprite sales to slow as much as they did. They were weighed down by a high base and cur­rency pres­sures on the con­ti­nent.

“How­ever the South African num­bers were good, as Shoprite re­ported the low­est in­fla­tion of all the lo­cal re­tail­ers and grew vol­umes, in­di­cat­ing they’re grow­ing their mar­ket share,” he said. “To be able to grow mar­ket share is a job well done.”

Re­ports have emerged that Shoprite was pre­par­ing to en­ter Kenya, as the lo­cal Naku­matt busi­ness strug­gles.

Shoprite op­er­ates 2 689 stores in 15 coun­tries, in­clud­ing Botswana, Zambia and Ghana. It said it opened 20 new su­per­mar­kets and 6 fur­ni­ture stores across the con­ti­nent dur­ing the pe­riod.

Its cur­rent pace of growth echoed the pre­vail­ing chal­leng­ing en­vi­ron­ment and had to be viewed in con­text of the very strong growth of 15.7 per­cent in the cor­re­spond­ing pe­riod of the prior year.

Shoprite, whose sub­sidiaries in­clude Medirite and Com­puticket, said that smaller di­vi­sions also made a good con­tri­bu­tion to group turnover.

The fur­ni­ture di­vi­sion re­ported in­creased sales of 8.9 per­cent, de­spite the amend­ments to the Na­tional Credit Act. The OK fran­chise di­vi­sion con­tin­ued to gain mar­ket share and saw a growth of 10 per­cent, in line with the group’s su­per­mar­ket per­for­mance.

The com­pany was pos­i­tive about its out­look.

“The de­fla­tion­ary en­vi­ron­ment is good news for con­sumers ahead of the im­por­tant

fes­tive sales sea­son, although con­sumer spend­ing is dif­fi­cult to pre­dict, es­pe­cially with

fur­ther rand weak­ness. In the medium term, how­ever, the group re­mains op­ti­mistic

about its op­er­a­tional strength and is mak­ing pos­i­tive progress on its strate­gic pri­or­i­ties,” the com­pany said.

Shoprite shares de­clined 2.27 per­cent on the JSE yes­ter­day to close at R202.77.

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