A difficult trading environment has not stopped the Shoprite Group Holdings from producing impressive results for the three months ending September 2019, with the company seeing a 7.3% growth in turnover during the period.
South Africa’s largest grocer saw its local operations increase sales by 10.3% during the quarter, with prices at its stores increasing by 3% over the period.
Portfolio manager at FNB Wealth and Investments, Kabelo Tshola said that the group’s performance shows a normalisation of its sales following various disruptions to its production during the same period last year.
“The [South African] operations reflect a resumption of their distribution centre after a prolonged strike and an IT upgrade. During this period the company lost market share in an already weak environment. This operational result reflects this regaining of market share whilst in a buoyant economy could be producing better numbers,” he said.
The group added 15 new stores across its trading brands including Usave (8), Shoprite (4) and Checkers (3). While the group’s furniture brand reduced by 10 stores, its LiquorShop added 10 stores to reach 500 stores across the country while its OK! Franchise Division grew its base by 10 stores during the quarter.
“The group’s other operating segments, which include the OK Franchise, Computicket, MediRite pharmacies and Checkers Food Services, reported a 6.4% increase in sales. The OK Franchise Division grew sales by 8.6%,” the group said on Monday.
“Whilst all three of our supermarket brands traded well, our hard discounter format, Usave led the growth,” it said.
The group introduced a customer loyalty rewards program called Xtra Savings in October through its Checkers stores, with more than one million members signing up within a week, exceeding the group’s expectations.
“This launch aligns with the Group’s focus to ensure our customers save more every day, paving the way for smarter decision-making and precision retailing. It also unlocks alternate revenue streams from existing and new customers,” Shoprite said.
But the backlash the group received in Nigeria following the wave of xenophobic violence in South Africa over the quarter weighed on its operations in the West African country, with overall sales in its non-SA operations declining by 4.9%. The group said that it is now looking at assessing its performance of its supermarkets in other African countries “with specific reference to the group’s return on capital invested in Africa.”
Wayne McCurrie from FNB Wealth & Investments said while aftermath of the xenophobic violence in South Africa marred the group’s operations in Nigeria, the main reason fro the poor perfomance is macro economic “these areas are just not doing well and suffer from currency and forex problems. They will not leave, but a good return [is] risking much longer than anticipated and remedial action is necessary”