Shoprite has grown volumes as it increased its share of the local grocery market.
Shoprite’s sales have reached a record despite restrictions on some categories at the height of the lockdown. Its shares rallied over 11% at their best on the news.
The retailer credited volume growth of 2.3% and continued market share gains at supermarkets including Shoprite, Usave, Checkers and Checkers Hyper for the improvement. Its furniture outlets were closed during the first stage of the lockdown while alcohol and tobacco sales were prohibited for much of the period. Covid-19 hampered trade, transport and its operations in the final quarter of the year and resulted in an additional R327 million in direct costs
Group merchandise sales increased by 6.4% to R157 billion for the year to end-June, with its core Supermarkets RSA business growing sales by 8.7% to R122 billion. Turnover at the continuing operations of its international business fell by 1.4% in rand terms but was 6.6% higher in constant currency. Its Nigeria business is included as a discontinued operation after it decided to put it up for sale. Although customer visits fell 7.4%, the average basket spend increased by 18.4% as consumers did bigger shops less frequently. Furniture sales declined by 11.9% and 10.3% on a like-for-like basis.
Trading profit declined by 2.7% to R8.17 billion but excluding the impact of hyperinflation was 10.4% higher at R8.3 billion. Operating profit fell 1.5% to R7.75 billion. Net profit came in 9.5% lower at R3.46 billion, including about R1.3 billion of impairments on its Supermarkets Non-RSA and Furniture businesses, with earnings per share (EPS) down by the same margin at 622.6c. Headline EPS improved by 2.6% to 767c and adjusted HEPS, which exclude foreign exchange movements and the impact of hyperinflation, rose 17% to 717.5c. It has raised its dividend by 20% to 383c per share.
Last month, Shoprite announced plans to exit Nigeria after it was approached by potential investors interested in buying Retail Supermarkets Nigeria. The decision followed a re-evaluation of its operating model in that country. Kenya also continued to underperform and it expected to close its remaining two stores in the country in the year ahead.
The economic landscape facing our business in South Africa and the rest of Africa is expected to remain challenging for the next 12 months,” CEO Pieter Engelbrecht said. “We have however demonstrated over the last 12 months that our businesses are well positioned to meet economic stress such as the Covid-19 pandemic.”
Shoprite said it had budgeted an estimated R4.8 billion in capital expenditure for the year ahead, including project work from the past year that was hindered by the lockdown. About 95% of the spending related to its local operations.
The retailer’s shares closed 11% higher at R129.
Main Image: Finacial Times
