Shoprite bullish on festive season sales

"Sales have picked up in September and October and management is confident that this trend will continue into the December festive season," the company said.

On Monday, 31 October 2011, Shoprite reported a 10.8% increase in total turnover for the three months to September.

With total internal inflation at 3.8% this represents real growth of 7.0%. The group's core business, Supermarkets RSA consisting of Checkers, Shoprite and Usave, grew turnover by 10.8% with internal food inflation averaging 4% compared to -1.8% for the corresponding three months in 2010.

The retailer's internal level of food inflation remains substantially below the official food inflation index of 7.7% for this period.

"Food inflation is picking up, and will be a bigger story going forward over the next few months. Initially it's good for the food retailers - they're sitting with stocks and they're not running long stock levels.

"But that benefit is over quickly and you get the negative knock-on effect from the consumers when they see price increases. So in the long run it's obviously negative for everybody," Abri du Plessis, CEO at Gryphon Asset Management told I-Net Bridge/BusinessLIVE.

Also on Monday, Shoprite said that based on the sector information at its disposal, it was confident that it continued to gain market share relative to its main competitors.

"[Our] confidence is supported by the increase in basket size ahead of internal inflation and the positive growth in customer numbers," it said.

In August, Shoprite boasted a 12.4% rise in full-year profit but sounded alarm bells saying competition amongst the major food retailers was expected to intensify.

Local retailers are bracing for an industry shake-up as US giant Wal-Mart's entry through its 51% stake in Massmart (MSM) is expected to heighten the already fierce trading environment.

Massmart aims to open 100 stores within the next three years, with a target of a 20 billion rand food retail business within five years.

Its vision to grow in the low-income and rural areas, through Cambridge Foods means head-on competition with Shoprite.

"We're ready to deal with competitors. We will handle Wal-Mart like we handle the others [competitors]," Shoprite's CEO Whitey Basson said in August.

Shoprite's furniture division grew 12.9% compared to the three months in 2010 immediately following the World Cup. Other divisions in the group which include OK Franchise, Medirite and Computicket grew turnover by 7% for the first quarter ended September.

"The same pressures that affected South African consumers continued to be evident in the rest of Africa.

"In constant currencies the turnover growth was virtually the same as in the corresponding period, namely 13.9% compared to 13.5%. Due to the recent weakening of the rand against major African currencies, the increase in rand terms was 12.7% as against 2.1% in 2010," Shoprite said.