South Africa-based Shoprite has provided an operational update for the three months ending September 2018. The retailer, which reported its first annual profit decline in 19 years, said that it had enjoyed a small increase in nominal revenue by 0.4% in Q3 2018. The retailer faced multiple challenges which impacted growth, such as currency devaluations, low food inflation and strikes.
Results affected by a series of challenges
The retailer explained that ‘sharp’ currency devaluations of Angola and Zambia contributed to an 8.6% decrease in revenue in South African Rand terms. Meanwhile, the retailer’s RSA supermarket sales were impacted by low internal food inflation of -0.1%.
Deflation in the business unit meant that ‘more than 11,607 items in September’ were cheaper than they were a year ago. The challenge faced by the unit exacerbated the issues being felt by its core customer base, who ‘remained under pressure from rising transport costs and unemployment’.
A six-week service provider strike combined with the roll out of a new warehouse also affected demand and local sales. This also impacted on product availability, especially in the broader Gauteng region.
Pieter Engelbrecht, CEO of Shoprite, commented, “We had to deal with three strikes in one year, deflation, new distribution centres and the implementation of a new SAP [systems applications and products] project, which required us to train 147,000 employees”.
Positive future expectations
However, the trading situation has now normalised, and Shoprite has reported a more positive volume trend and increased product availability. Engelbrecht added, “We are going flat-out to Christmas; the results will be soft for the half year but good for the full year”.
To support this positive outlook, Shoprite said it would open a further 41 supermarkets by the end of 2018 and remained focused on its strategic priorities ‘around private label development, franchise offer and its ability to capture a higher share of the more upmarket shoppers’ grocery spend’.