Shoprite beats recession and inflation

2010/02/23

Shoprite presented the financial results for the first half of its current financial year, saying that turnover rose 11.9% to R33.14 billion in the period to end-December 2009. Trading profit rose 17.5% to R1.66 billion in the same period. These figures are significantly higher than food price inflation, which reached 4.2% during the six-month period. Amid still-weak consumer demand, retail sales in South Africa rose by 4.9% in 2009 but fell by 4.9% when excluding price changes.

In the South African market, which was hit by recession in 2009, Shoprite benefited from its targeting the lower end of the retail market, particularly in the shape of its Usave discount store division. Overall supermarket operations – including Shoprite, Checkers and Usave – posted turnover growth of 14.5% during the period. In the non-food arena, Shoprite’s furniture division achieved 11.5% sales growth within a product category that was virtually free from inflation. Like-for-like sales rose by 4.5%.

Commenting on the results, CEO Whitey Basson said the group’s results were achieved in a challenging environment in which consumers came under increasing pressure to curb spending while the economy corrected itself. He said: “The relief provided by much lower food inflation was to a large extent cancelled out by growing unemployment and rising energy costs. That we could achieve a trading profit growth of 17.5% on turnover that grew 11.9% is due to an experienced management team that controls the cost base rigidly while maximising the benefits provided by our advanced infrastructure in information technology and supply chain management.”

Looking ahead, the retailer gave a cautious outlook for the rest of the year, saying that it saw “little change” in market conditions, despite the fact that South Africa’s recession is technically over and interest rates have come down. However, consumers remain indebted and in need of consolidating their finances, while unemployment continues to be high at 24.3% in Q4 2009. Basson said: “We can see daily in our stores how consumers are struggling. And although food retailing is often the last to be affected by a downswing, it is also frequently the last to benefit from any recovery. However, I am confident that as a group we shall be able to maintain our position of market leader.” (source:Planet Retail)