We won't pursue 'unprofitable market share' - Shoprite

Speaking to journalists in Johannesburg after the group released its annual results, Basson said the group would continue to open more stores and pointed out that it had confirmed 85 planned store openings, 64 of which were supermarkets.

Shoprite reported that its diluted headline earnings per share for the 12 months ended June 2009 were at 390.8 cents, up 30.9% from the previous years 298.6 cents. The board declared a final dividend of 130.0 cents per ordinary share to bring the total distribution for the year to 200.0 cents per ordinary share (2008: 155 cents), an increase of 29%.

Operating profit for the year at R2.913 billion was up 24.7% from the R2.336 billion reported before. Total turnover for the period was at R59.319 billion, up 24.5% from the R47.652 billion reported before.

Basson said the success of the group in an intensely contested retail environment was the result of a focused business plan applied consistently over the years by a stable and experienced management team.

"Central to this plan is the decision to control, to the best of our ability, all aspects of our business, from focusing on the right market segments to reducing the cost of managing a very large and complex business."

To stimulate sales and assist hard-pressed consumers, especially lower-income shoppers, management continued to lower gross margins. To support the growth of the business, a net 59 supermarkets and a net 28 furniture stores were opened during the year.

"Our workforce complement was increased from 73 000 a year ago to 84 000 at the end of June." He pointed out that Shoprite remained South Africa's biggest retailer with a market capitalisation of R31 billion during August 2009.

The group said all three of its food chains in South Africa - Shoprite, Checkers and Usave - outperformed the market with a combined turnover growth of 22.8% to R46.551 billion.

Giving an operational overview, Basson said the group had seen excellent volume growth despite the economic downturn.

"We were assisted by high food inflation in all countries and 13% in currency conversion to the rand for non-RSA countries," said Basson. He also pointed out that non-RSA countries were less impacted by the global economy and increased profitability by more than 50%.

"Despite the economy, we continued investing our own capital in 95 new stores and acquired strategic properties worth R420 million," said Basson.

"We aggressively maintained a low price leadership positioning and paid dividends in the tougher economic times. We have more than 14 million individual shoppers as well as an extremely loyal customer base."

Regarding its Checkers business, Basson said the brand had grown 27.6%, faster than any other supermarket in SA. The Usave business was the fastest-growing store format locally with 36 stores which served 50 million customers.

"We aim to open a store a week," said Basson. Regarding the furniture business, divisional director Aubrey Karp said the eroding disposable income affected spending on durables.

"In a difficult environment consumers don't invest in durables," he said. Karp said a concern remained the fact that supply lines were limited by numerous local manufacturer, wholesaler and import business closures.

Despite that Karp said: "We have a potential to grow the business by at least another 50% in terms of store numbers. "As a business we stick to our knitting and we still focus on store growth."

Looking ahead for this division, Karp said it was expected that the low-growth environment would continue until the end of 2010, partly because the group strictly applies the NCA affordability calculation and because of consumer disposable income being under pressure.

He said the group hoped to open at least another 10 furniture businesses. Basson said he anticipated trading conditions to become more difficult and that job losses would increase as more small businesses would exit the market due to reduced consumer spending, higher electricity tariffs and local government taxes which increase the costs of many businesses to unaffordable levels.

"The Shoprite Group is, however, better placed than most - and also employs the best people - to weather the storm and we are confident that we will prevail to the benefit of all our colleagues and stakeholders," said Basson.

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