Feb 21, 2012
The Shoprite Group has achieved strong turnover and profit growth across all business segments in the six months to December 2011. It increased turnover by 13,2% to R41,054bn in a highly contested trading environment and trading profit by 16,7% to R2,164bn. During the review period the Group’s internal inflation was 4.6% on average, against the official inflation figure of 5,8%.
Shoprite Group chief executive officer, Whitey Basson, said trading profit was boosted by particularly good sales during the festive season. “Turnover during the second quarter gained 15,4% and in December it improved even further with an increase of 17,2%, which was helped along by a healthy demand for higher-margin general merchandise items.
“The reason for this strong performance lies in the fact that a wide selection of merchandise was once again available in stores well before the start of the festive season trading period so that we could reap the maximum benefit from increased consumer shopping.
“The efficient stocking of stores was made possible by our continuous substantial investment in information technology systems and built infrastructure which provides us with a supply chain that operates at an increasingly high level of efficiency and distribution centres with greatly enhanced capacity.
“In addition to strict management control systems, the greater efficiencies generated by this investment have made it possible to increase our trading margin to 5,3%, 5,1% in the comparative period, while continuing to offer the lowest prices in the market,” Basson said.
Headline earnings for the period was R1,421bn which translates into headline earnings per share of 280,8c, an increase of 18,6%. Discussing the individual components of the business, Basson said all the divisions experienced satisfactory growth in turnover and trading profit. Growing the Group’s footprint remained a priority and a net 59 stores were opened during the six months to bring the total to 1 303. Of these, 852 are supermarkets and 308 furniture outlets. A further 174 stores will be added by June 2013.
The core business, Supermarkets RSA, grew sales by 12,3% to R32,031bn and trading profit by 16,8% to R1,788bn. During this time the supermarket chains’ internal food inflation of 5% on average remained substantially below Statistics South Africa’s official figure of 9.3%. The average value per customer transaction across the three chains increased by 7,6%.
Shoprite now operates 339 supermarkets within South Africa and Checkers, including Checkers Hyper, 186. Both increased turnover by 11% and extended their customer base. Where in the case of Shoprite the main focus continued to be on price, Checkers tended to strengthen its specialist areas with new lines such as imported wines and world-famous brands such as Starbucks coffee, which was launched in January 2012.
The flourishing Usave chain with 204 small-format stores grew sales by 20,9% off a relatively low base while the number of customer transactions increased by 10,2%. The chain is driving to strengthen its presence in both rural and urban areas and gained a net 14 new stores in the review period.
The relative weakness of the rand against the main African currencies during the review period assisted the Group’s 123 supermarkets in 15 countries outside South Africa to achieve a sales growth of 21,2%. At constant currencies this represents a rand turnover growth of 16,9%. “We are delighted with this overall solid performance and our strong presence in countries such as Nigeria and Zambia, where competition has increased considerably,” Basson said.
The Group’s furniture division continued its very competitive pricing policy to boost unit sales and in a highly deflationary environment achieved a sales growth of 13,6%. The growth came mainly from OK Furniture and OK Power Express, the two chains which focus on the middle market. The division now trades from 308 outlets, 240 of which do so under the OK Furniture banner.
During the review period, the Group’s franchise division consolidated the acquired Metcash Franchise stores which assisted it to grow total turnover by 16,7%. The takeover added 148 stores to the division’s membership base to bring it to 419.
Due to transitional rules relating to the phasing out of secondary tax on companies and its replacement with the new dividends tax, the board has decided to defer the declaration of an interim dividend until after 1 April 2012, but as soon as reasonably possible thereafter.
Looking ahead to the second half of the financial year, Basson said he did not expect any material changes in market conditions although food inflation was bound to increase further. “There is nothing in the economy suggesting that the pressure on consumers will ease. However, I believe we are well equipped to maintain our present growth in turnover and profitability, albeit at a slightly lower level.”