Feb 25, 2014
The Shoprite Group is well on its way to achieve a turnover of R100bn for its full year after half-year turnover exceeded R50 billion for the first time, reaching R51.090 billion.
The Group continued its strong turnover growth in Africa beyond South Africa's borders for the six months to December 2013, thereby partially offsetting the more sluggish demand at home. It reported overall turnover growth of 9.7% while sales elsewhere in Africa increased by 28.1% in rand terms and 14.9% in constant currencies.
The Group’s trading profit was 7.5% higher at R2.690 billion (2012: R2.503 billion). Headline earnings per share rose to 341.0c (2012: 315.9c) and the board declared a dividend of 132c a share, 7.3% up on the 123c of a year ago and attained a trading margin of 5.3%.
The Group created more than 5 400 new jobs in the six months period to bring the total to 116 743 employees as a result of its store opening programme and this trend is set to continue for the rest of the financial year.
Shoprite’s Chief Executive Officer, Whitey Basson said the lack of consumer disposable income had an adverse impact on the retail environment in which competition for the consumer’s rand has greatly intensified.
“Despite these conditions, we did not slow the pace of our store development programme but continued to open new outlets at a rapid rate. The net 104 corporate stores opened over the past 12 months added more trading space to our portfolio compared to any of our competitors.”
“We did so because our growth strategy has always been focussed on the long term to ensure that our stores are optimally located in order to derive the maximum benefit when the economy recovers.”
He said the difficult trading conditions, which manifested themselves in the first six months of 2013, had continued in the reporting period. Strikes in several sectors have become an entrenched part of the local business landscape.
The Supermarkets RSA division, the Group’s core business, comprises the operations within South Africa including Shoprite, Checkers and Checkers Hyper, and Usave. The division increased turnover by 7.6% to R38.275 billion while restricting average internal food inflation for the six months to 3.8% compared to official food inflation of 5.2%. This yielded a trading profit of R2.185 billion. On 15 December, the day of the funeral of former President Nelson Mandela, all the division’s supermarkets were closed as a mark of respect. An estimated R260 million was lost in sales.
The Group’s 163 supermarkets outside the borders of South Africa continued their strong growth across the 15 countries where they trade. The 28.1% sales increase in rand terms was supported by the rand weakening more against the US dollar than did the currencies of some of the African countries in which the Group trades. A further 13 new supermarkets are expected to start trading before the current financial year-end in June.
Basson said despite the present weaker industry demand for durable goods, the Group’s furniture division reported healthy turnover growth of 10.5%, due to the strong performance of its dominant OK Furniture chain. “This growth was achieved despite deflation of 1.7% in major product categories. Credit exposure was carefully monitored while margins were not sacrificed to build turnover.”
Looking ahead, Basson said he did not expect trading conditions to improve significantly during the rest of the year. Food inflation is also predicted to rise given the current exchange rate weakness. At the same time he was confident that the Group’s business outside South Africa would continue to flourish, aided by the new stores coming on stream before year-end. A total of 101 new corporate stores, including 74 supermarkets, are confirmed to open throughout the Group before June 2014, he said.
View results here.