Strong performance from Shoprite

7 Nov 2012

Market share gains in South Africa as well as a strong performance from its African operations boosted Shoprite's turnover by 15.6% in the first quarter‚ the company said in a trading update yesterday.

Shoprite said its core business‚ Supermarkets RSA‚ grew turnover 12.2% with food inflation averaging 3.6% compared with 4% in the corresponding three months last year. Internal food inflation was below official food inflation of 5.3%‚ and real sales growth of 8.6% was achieved‚ it said.

Shoprite chief executive Whitey Basson said the performance of the group's African operations was boosted by the opening of 20 new food outlets since October last year‚ these included eight Shoprite supermarkets and 12 Usave stores.

In constant currency terms‚ turnover for the African operation was 26.4% higher compared with 13.9% in the corresponding three months last year. The increase in rand terms amounted to 34.3%.

Avior Research analyst Michael McLeod said it was a strong trading update especially when compared with Pick n Pay.

"Shoprite is taking market share in a tough environment. It showed good growth in Africa‚ which was ahead of expectations while in the low inflationary environment in South Africa‚ it still managed to grow turnover 12.2%. A good performance overall‚" McLeod said

Vestact analyst Sasha Naryshkine said given the "ropey outlook" delivered by other retailers‚ Shoprite's trading update looked good.

Last week‚ Pick n Pay‚ South Africa's second-largest grocer‚ reported a 34.4% decline in first-half profits as the tough consumer environment and transformation costs continued to affect its performance.

Analysts described the results as poor with headline earnings per share for the six months to August 31 falling 34.4% to 35.91c per share.

Walmart-owned Massmart last week said that for the 14 weeks to September 30 total stores' sales increased 16.6% and comparable stores' sales rose 7.8%.

Turnover in Shoprite's furniture division grew 11.9% despite the deflationary environment. Other divisions in the group including MediRite and Computicket grew turnover by 29%‚ it said.

Basson said consumers were under increasing pressure‚ making it difficult to predict spending patterns going into the festive season.

Source: I-Net Bridge

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