Shoprite continues to lead the pack despite tough trading conditions
SHOPRITE competes with rivals Pick n Pay, Woolworths and Spar in an ever-tight trading space with consumers under financial strain amid the high cost of living.
In its results for the 52 weeks to July 3, 2022, released yesterday, South Africa’s biggest grocer said adjusted basic headline earnings per share increased by 22.5 percent to 1 086.5 cents, compared to last year’s 887.3c.
The retailer’s sales increased by 9.6 percent, which equates to an additional R16 billion.
“On a 52-week basis, our customers spent an additional R19.6bn with us this year. This growth equates to R6.2bn in South African market share gains for the period,” the group said.
Shoprite declared a R6 dividend, which it said was a 10.3 percent increase on last year.
Shoprite chief executive Pieter Engelbrecht said: “It was an extraordinary year for Shoprite, and we’re all aware of the challenges operationally, structurally and financially. Shoprite is much stronger. I’m very pleased with the state of the business. Currently, I’m not worried about the business and its ability.”
The Shoprite and Usave supermarket businesses, which together make up 52.8 percent of its Supermarkets RSA operating segment, increased sales by 7.2 percent, despite having two of its large-format Checkers Hypers still closed due to the July 2021 social unrest.
The Checkers and Checkers Hyper supermarket business, which makes up 39.8 percent of Supermarkets RSA sales of merchandise, increased sales by 9.1 percent.
The group’s on-demand grocery app, Checkers Sixty60, continued its growth, now trading from 300 stores, from 233 in the prior year.
Shoprite and Checkers LiquorShop business, which constitutes 7.2 percent of the segment’s sales, increased by 44.5 percent.
“This is due to strong underlying growth and the fact that the business was closed for fewer days as a result of Covid-19 regulations this year. In 2022, they were closed for 48 days, versus last year’s 144 days closed,” Engelbrecht said.
According to Shoprite, its core Supermarkets
RSA operating segment opened 117 stores during the year, and Shoprite also created 4 316 new jobs in South Africa.
Engelbrecht said Shoprite continued with its share buy-back programme and advanced its proposed acquisition of Cambridge Food, Massfresh and Mass Cash and Carry to the Competition Tribunal approval stage.
“I sincerely hope this transaction can be finalised during the first half of the 2023 financial year to allow us the opportunity to integrate these businesses and their employees into our South African Shoprite supermarkets’ operations,” he said.
Looking ahead, the group said the period aligning with its 2023 financial year was expected to remain challenging for its broad base of South African customers who, like many consumers around the world, were facing considerable hardship due to elevated transport, food and borrowing costs.
Anchor Capital’s Zinhle Mayekiso said Shoprite delivered a commendable 2022 financial year performance that was characterised by continued upper single-digit top-line growth, which when compared to the performance of its competitors remained best-in-class thus far.
“Gross profit margins were stable and trading profit margin marginally declined from 6.1 percent to 6 percent. Although actual diluted headline earnings per share were below consensus expectations, Shoprite’s overall performance was still solid as the reporting period was not without any challenges,” she said.
“Overall, Shoprite continues to lead the pack within the food retail space in terms of market share gains as well as top-line growth, which solidifies its higher valuation multiple relative to its competitors,” she said.
Despite the strong results, the share price dipped on the JSE by 7.49 percent yesterday to close at R217.63, but increased by 1.4 percent in the past year.
Wayne McCurrie, a portfolio manager at Ashburton Investments (@ WayneMcCurrie), tweeted: “Shoprite disappointing profits. Turnover looked good but margin pressure. Share down 7 percent. There are some mitigating factors. One week less trading, riots etc, but still not good. I would have thought that they would have done better. Earnings up 10 percent.”