Shoprite forges ahead with sales up 12%, new stores opened

The giant among South Africa’s retailers, Shoprite, on Tuesday reported a 12% surge in annual merchandise sales, which it attributes to a combination of new store openings and robust sales across most of its store brands. 

Customers will be pleased by the reported cooling in food prices, which is in line with Stats SA’s latest consumer data, which reveal annual food inflation is the lowest in 45 months. The group said its internal selling price inflation averaged 5.8% for the year ended 30 June (first half 7.7%; second half 4.2%), ending the year at 3% for June 2024.

Stats SA reported last week that the food inflation rate in June had eased to 4.6% from 4.7% in the previous two months, which is the lowest level since September 2020 and a significant decline from the peak of 14% reached in March 2023.

While prices for several food items, including sugar, sweets, vegetables, fruit and dairy had decreased, other staples saw price hikes. Notably, the cost of hot beverages surged, with tea and coffee prices increasing sharply. Bread and cereals also underwent renewed price pressures driven primarily by rising maize costs.

Despite the overall slowdown in food inflation, the persistent increase in the price of essential items like bread and maize remains a concern for consumers, according to the national statistics service.

On Tuesday, in an operational update for the 52 weeks ended 30 June 2024, the Shoprite Group said its total merchandise sales had increased by 12% to about R240.7-billion, including the impact of Ghana’s hyperinflation. 

The West African country officially entered a period of hyperinflation in December last year after a sustained period of high inflation, culminating in a three-year cumulative inflation rate reaching 128%.

In March, Bloomberg reported that hyperinflation in Ghana had dented another South African company’s profits: it had cost the Absa Group R403-million due to rising prices, which the bank said could have a “somewhat larger” impact on earnings this year.

Hyperinflation accounting was applied from 3 July 2023 for Ghana. 

Excluding the hyperinflation issue, Shoprite’s merchandise sales rose to R240.8-billion (12%). The group added a total of 292 stores, including 73 OK Franchise stores, bringing its total to 3,639 stores.

Total group sales were up by 12% to R215-billion.

Shoprite’s Supermarkets RSA division grew by 12.3% to R173.6-billion, contributing 81% towards the group sales.

Outside South Africa, Supermarkets Non-RSA grew by 6.1% to R19.6-billion.

Furniture sales rose by 2.3% to R7.1-billion, while other operating segments — OK Franchise, Transpharm, Medirite, Red Star Wholesale Catering Services and Computicket — reported 21.1% sales growth, representing 7.4% of Group sales, to R14.6-billion.

Unlike the first half’s growth, which included the stores the group acquired from Massmart, the second half of the year saw 10.1% growth through the rebranded 51 Shoprite, one Usave and 40 Shoprite LiquorShop stores.

Internal selling price inflation averaged 5.8% for the period (first half 7.7%, second half 4.2%), ending at 3% for June 2024. 

Checkers and Checkers Hyper sales grew 12.3%, with Checkers Sixty60 online sales surging by 58.1%.

Shoprite and Usave sales increased by 10.7% and LiquorShop sales rose by 20%. 

Supermarkets RSA opened 201 stores (compared with the 301 it opened last year, including the Massmart acquisitions), bringing the total to 2,322 stores.

Of these new openings, 20 stores were Shoprites, 22 Usaves, 25 Checkers and 71 LiquorShops, with the remaining 63 being specialist stores. Petshop Science added 33 new stores, bringing its total to 86 stores; Checkers Outdoor added 14 new stores (total, 22 stores); UNIQ Clothing added 13 new stores (now a total of 22 stores) and Little Me, the baby brand, opened three new stores (total 12 stores).

Supermarkets Non-RSA sales increased 6.1% in rand terms, excluding hyperinflation, contributing 8.6% to group sales. The store base grew by 15 stores to 266 in nine countries.

The group said diesel costs for generators during load shedding in Supermarkets RSA cost R754-million for the year. During the first half of the year, it spent R500-million on diesel. 

“This decrease in diesel costs should be considered in light of a commensurate increase in electricity usage. As a result, we anticipate the percentage increase in the group’s water and electricity expenses for the year should be mid to low single digits.”

A year ago, Shoprite’s Group CEO Pieter Engelbrecht told investors during its year-end results that despite the country’s power problems, they were pleased to report growth in both headline earnings and dividends per share. At the time, the company spent R1.3-billion on diesel-to-power generators.

Shoprite Holdings will release its year-end results on 3 September 2024. DM