Shoprite shares surge on strong profits

Chain strengthens market position despite subdued consumer spending

SHOPRITE shares rose nearly 8 percent on the JSE yesterday after the group reported that its local operations boosted its profits against subdued spending by consumers.

Africa’s biggest food retailer said its turnover for the year to June surged to R141 billion with LiquorShop achieving the highest sales growth of R4.8bn.

Chief executive Pieter Engelbrecht said the group compounded high levels of unemployment, consumer indebtedness and shrinking disposable income to strengthen its stranglehold on the local retail market, opening 1 001 supermarket stores in the country and stamping its footprint in Africa.

Engelbrecht said the company managed to grow its businesses against the consumer indebtedness and the shrinking in disposable income.

“While developing countries beyond Africa are under investigation, the group will continue to enlarge its footprint on the continent through expansion in the current countries it operates in as well as new territories altogether,” Engelbrecht said.

Shoprite currently trades in 15 countries with 2 689 stores.

The group said it created more than 6 000 job opportunities during the period with the youth being the main beneficiary.

It said its total staff compliment now stood at 143 802.

Engelbrecht added the South African supermarket operation, which represents 72 percent of total sales and 79 percent of trading profit, grew 8 percent in a tough operating environment.

He said diluted headline earnings per share also rose 11.9 percent to 1 007.4c a share.

It declared a dividend of 504c per ordinary share, up 11.5 percent over the 452c of the corresponding period last year.

Shoprite’s market share increased to 31.9 percent locally and it stated that internal food inflation averaged 5.9 percent compared with official food inflation of 10 percent. “We have shielded customers from R1.8bn of potential additional expenses, had our prices tracked inflation,” he said.

Bright Khumalo, an analyst at Vestact, said Shoprite released a solid set of numbers considering the current tough trading environment in the food sector and the South African economy falling into a technical recession last quarter. Diversification across many geographies came in handy in the results.

Khumalo said the company still controlled the local market share at 31.9 percent.

“Growth on a like-for-like basis still came in positive and strong at 5.8 percent – (and this was) off a high base.

“The internal food inflation is almost half of the basket-food inflation and shows this company is doing something right and putting R1.8bn back into customers’ pockets,” Khumalo added.

Shoprite shares closed 8.01 percent higher at R217.11.