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2022-03-08

Shoprite wants to position Checkers in the mid-to-upper market – as it targets pet, baby and health

Retailer Shoprite says it generated an additional R8.3 billion in sales versus the corresponding period to increase sales by 10.0% to R91.1 billion for the 26 weeks ending 2 January 2022.


Staff Writer | Business Tech

The group maintained its 24.1% gross margin and increased trading profit by 14.5% to R5.4 billion. This performance resulted in a trading profit margin of 6.0% compared to the 5.7% trading profit margin reported for the corresponding period, it said. The group’s earnings before interest, tax, depreciation and amortisation (EBITDA) increased by 12.9% to R7.9 billion.

The group’s total capital spent amounted to R2.7 billion for the period (H1 2021: R1.6 billion). The spend represented 2.9% (restated H1 2021: 2.0%) of sales calculated on a 26-week basis.

“The increased spend is in line with our capital allocation model and supports the investment in expanding the store portfolio as well as the group’s commitment to digital acceleration and margin expansion,” Shoprite said.

Diluted headline earnings per share (DHEPS) from continuing operations increased by 25.2%, while the board declared an interim dividend of 233 cents per share. This represents a year-on-year dividend per share growth of 22.0%.

This result was achieved in a period which included ongoing Covid-19 lockdown regulations and the impact of unprecedented political and civil unrest in KwaZulu-Natal and Gauteng provinces where 231 of the group’s stores were damaged and a considerable number of adjacent stores in the affected areas were also closed for a period.

At the end of the reporting period, 45 stores remained closed, of which seven will not re-open. Shoprite said it opened 99 stores during the period under review, expanding its continuing operations footprint to 2,933 stores.

Supermarkets RSA

The group’s core business, Supermarkets RSA, making up 79.5% of sales from continuing operations, is represented by 1,748 stores across major trading banners: Shoprite, Usave, Checkers, Checkers Hyper and LiquorShop. As a segment, Supermarkets RSA achieved 11.3% sales growth (like-for-like: 10.7%).

Customer visits for the period increased by 6.2% and average basket spend increased by 4.8%.

Checkers, inclusive of Checkers Hyper, ended the period with 271 stores. Checkers upgraded eight of its supermarkets during the six months and opened five new supermarkets, 12 PetShop Science stand-alone premium pet stores and one Little Me stand-alone baby store.

Checkers said plans to open an additional 11 supermarkets and nine PetShop Science stores by June 2022.

The group opened its first PetShop Science store in 2021, and closed the year out with 12 standalone stores. It follows openings of the group’s first standalone Checkers Little Me baby store, the smaller format Checkers Foods store as well as the new MediRite Plus.

Checkers said its Sixty60 on-demand grocery delivery app has maintained its growth trajectory, expanding the store base from which it services Checkers customers to 266 stores (FY 2021: 233 stores).

Shoprite, the group’s ‘price-fighting supermarket business’ ended the period with 527 stores. Shoprite opened 10 new stores during the six-month period and is on track to open a further 18 by year-end.

The segment’s LiquorShop business, representing 7.4% of Supermarkets RSA’s sales, increased sales by 49.8%. During November 2021 the business launched LiquorShop Online, for home delivery.

In terms of its physical store base, LiquorShop added 28 new stores during the six months. LiquorShop ended the period with 555 stores. The business plans to open 27 additional LiquorShops by June 2022.

The group said its private-label strategy remains on track with its participation measuring 18.0% for the period.

“The extraordinary growth in sales and profits reported by the group for the first half of our 2022 year is testament to the capable people of Shoprite, united in their commitment to the group’s millions of customers throughout South Africa and Africa,” said Pieter Engelbrecht, chief executive officer.

He said that despite having two of the group’s large-format Checkers Hypers still closed due to the July 2021 civil unrest, all supermarket brands grew sales ahead of the market.

Shoprite and Usave, which together make up 52.5% of our Supermarkets RSA operating segment increased sales by 7.3%. Checkers and Checkers Hyper, which make up 40.0% of Supermarkets RSA sale of merchandise, increased sales by 11.4%.

After being closed for much of last year due to lockdown regulations our Shoprite and Checkers LiquorShop business, which constitutes 7.4% of the segment’s sales, increased by 49.8%.

“The continued momentum and customer support demonstrated by all our supermarket brands is particularly gratifying given our relentless focus on affordability. Our low-price promise continues to guide our daily decision-making, evidenced by our 2.6% selling price inflation for the Supermarkets RSA segment for the six months.

“In addition to this, our 23.1 million customers who have joined the Shoprite and Checkers Xtra Savings Rewards Programme have saved R4.5 billion during this six-month period alone.

“We’ve continued to strengthen our core supermarket business by opening new stores, updating existing stores, introducing new products and bringing new trading formats to the market. We’ve also evolved our fintech business and ShopriteX, the group’s tech and innovation hub, which has continued to raise the bar with numerous initiatives,” said Engelbrecht.

Looking ahead, Shoprite said it is increasingly finding opportunities in adjacent avenues and partnerships that leverage the group’s existing business and substantial customer base. “Examples of such initiatives include our ongoing tech and digital innovation, retail media and financial services developments.”

“In terms of category growth, as mentioned, we are extending our reach in pet, baby and health as well as beauty/pharmacy.

“Notwithstanding these growth opportunities and the learnings that will come from them, the majority of future growth for the group will continue to be achieved from the pursuit of growth in our core supermarket business, underscored by our low-price leadership promise, whilst focusing on growing Checkers’ position in the mid-to-upper segment of the market.”

 

 


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