Shoprite (SA)’s FY results +6.4%

Date : 12 August 2020

Jon Wright

Head of Insight - RA EMEA

South Africa-based Shoprite saw sales in the 52 weeks to 28 June 2020 rise 6.4% to ZAR156.9 bn (US$8.9 bn), with like-for-like sales up 4.4%. The retailer’s performance was driven by its home market, where sales were up by 8.7%, aided by a strong second half of the financial year. The impact of coronavirus (COVID-19) on its results was underlined by Shoprite reporting that basket sizes grew 18.4%, while the number of shopper visits fell by 7.4%.

Commitment to long-term strategy remained…

The retailer noted its performance and profitability were impacted by coronavirus, but despite this it had remained focused on providing value and rolling out shopper-focused solutions. In this area it highlighted its ‘digital voucher innovation, ongoing private label development and the conversion of… Checkers Food Services (CFS) business to include a consumer facing offering’.

…As costs rose due to the pandemic

The company highlighted the investment it had made in its business to comply with lockdown regulations in South Africa as it looked to maintain the safety of its staff and shoppers alike. As a result of the pandemic, it invested ZAR327.2m (US$18.5m) on ‘health and safety, security, mobile clinics, personal protective equipment, temperature scanners, store and distribution centre sanitation, employee meals, communication costs and remote network access for employees’. Spending on its staff took the largest share of the investment, which accounted for ZAR116.9m (US$6.6m) of the total figure.

Strong growth in South Africa offset by regional performance…

Its supermarkets in South Africa drove growth, with total sales up by 8.7% in the financial year and like-for-likes up by 6.8%. Growth was 9.8% in H1, with H2 sales up by 7.5%, with the latter boosted by growth of 9.4% in Q4. Volume growth for the full year stood at 2.3%. By banner it said Shoprite and Usave reported full year sales growth of 6.7%, while Checkers and Checkers Hyper reported full year growth of 13.5%. Internal inflation for the year stood at 3.0%.

A key bright spot in the retailer’s performance in South Africa is its online operations. Shoprite highlighted the investment it had made in its online services, including ‘the rapid scaling of our innovative Checkers Sixty60 digital shopping application, which after a test phase introduction in November 2019, was operational from 87 stores nationwide by June 2020’. While the service was launched promising delivery in an hour, due to demand driven by COVID-19 it had been forced to guarantees same-day delivery.

Outside South Africa, though, the retailer saw sales contract by 1.4% in the full year, excluding its operations in Nigeria. The 2.7% fall in H1 was partially offset by growth of 0.1% in H2 in Rand terms. It reported growth of 6.3% in constant currency terms. It said its operations outside South Africa had been ‘significantly impacted by lockdown regulations across the 14 African countries’ it operates in.

…Which led to discontinuation of operations in Nigeria

The ongoing challenges for its operations outside South Africa had been previously flagged. The retailer noted ‘following approaches from various potential investors, and in line with [its] re-evaluation of the Group’s operating model in Nigeria, [it] has decided to initiate a formal process to consider the potential sale of all, or a majority stake, in Retail Supermarkets Nigeria…’. Shoprite has 25 stores in Nigeria after operating in the country for nearly 15 years, underlining the challenges and slow pace of expansion it has seen.

Separately it has been reported the retailer has closed a second outlet in Kenya, its City Mall branch in Nyali, Mombasa. This is the second store Shoprite has closed in Kenya in five months, which will leave it with just two in the country, underlining its commitment to focus on profitable growth, rather than expansion at any cost.

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