Shoprite turnover up 9.7% due to African expansion - CNBC Africa

Shoprite turnover up 9.7% due to African expansion


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Shoprite Checkers. PHOTO: Mooi Rivier Mall

“In the six months to December 2013 the Shoprite Group grew total turnover by 9.7 percent to 51.090 billion rand in an environment which, within South Africa, has remained difficult. Our turnover was supported by the strong growth we achieved elsewhere in Africa,” said Whitey Basson, chief executive of  [DATA SHP:SHOPRITE HOLDINGS LTD.].

The groups is currently Africa’s largest food retailer with a total of 163 supermarkets operating outside of South Africa, across 15 African counties as well as on the islands in the Indian Ocean.

Despite South African trading conditions remaining challenging, the group continues to open new stores in the country with 177 supermarkets and 30 hyper markets currently operating.

“Despite the present challenging trading conditions locally we have continued our long term investment strategy in new stores adding more trading space to our portfolio than any of our competitors,” added Basson.  

Total trading profit for the group was up 7.5 percent to 2.690 billion rand while headline earnings per share rose 7.9 percent to 341 cents.

A dividend of 132 cents per share was declared for the period, equating to a 7.3 percent increase.

Sales increased by 28.1 percent in rand terms and by 14.9 percent in constant currencies. Basson explained that sales were negatively impacted by the group’s decision to close all stores on the 15th December to commemorate former South Africa president Nelson Mandela after he had passed away on the 5 December 2013.

“Sales in December were negatively impacted by approximately 260 million rand in our decision to close all South African stores on the 15th of that month, the day of the funeral of former President Nelson Mandela. We did so as a mark of respect at his passing and also out of recognition for the huge debt we owe him for creating a climate of dynamic growth which took Shoprite way beyond the borders of this country,” he added.

Challenges in South Africa’s economic space also affected group earnings, such as the rise of violent protests over service delivery countrywide, unemployment hitting 24 percent as well as overburdened consumers that are struggling to meet their debts, living expenses and consequently lacking disposable income.   

“The consequent lack of disposable income has a severe impact on the retail environment in which competition for the consumer’s rand has greatly intensified in the six months under review,” continued the statement.

The chain stated that their focus is on alleviating the plight of low income consumers through support programmes such as its 20 million rand food subsidy campaign.

Since both their Checkers’ supermarkets and hyper stores saw slower growth in an environment of intensified competition, the group stated that they will be working on a long term repositioning strategy, where they will be focusing on increasing their product ranges in their popular departments such as their steakhouse classic meats, local and international wines, speciality cheeses and their coffee collection.

Usave, the group’s discounter aimed at lower income consumers, has gained a net 16 new stores during the period to bring its total number of outlets to 259. The brand also continues to gain a loyal following of price conscious consumers, especially in rural and semi urban areas.

“The board does not expect any improvement in the trading environment within South Africa in 2014. At the same time our business outside the borders of the country continues to flourish and a number of new stores are to come on stream before year-end,” said the company.

“Strict cost control measures are rigorously applied throughout the business while we are constantly refining our extensive distribution network which is a major strength of the Group. Against this background the board is confident that the Shoprite Group will be able to maintain its present level of profitability growth in the second half of the financial year.”