Sunday, January 16

Shoprite’s share price surpasses 52-week high, as SA trading shines


The share price of Africa’s largest food retailer Shoprite surpassed a 52-week high on Monday, with the stock gaining nearly 4.5% thanks to a very strong trade update and the market taking in the news of its Cambridge’s planned R1.35 billion acquisition of Massmart. Food business, rhinos and fruitspot.

Its share price closed at R177.23 per share, valuing the group at more than R100 billion.

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Shoprite’s latest update reveals that the group’s main South African business showed double-digit sales growth in the second half of the 53-week period to July 4, 2021.

Read: Massmart sells most food assets to Shoprite for R1.35bn

Nicknamed Supermarkets RSA, the local division contributes 79.7% of sales from continuing operations.

Sales growth

In the first half of its financial year, Shoprite’s core business posted sales growth of 5.6%. That was during the busiest part of the year – the June-December period, which includes Black Friday and the holiday season.

But in the second half (of the 53 week period), Shoprite’s sales were up 13.2% in ‘RSA Supermarkets’.

This is more than double the sales growth it achieved in the first half of its financial year, which recorded overall sales growth in its SA business increasing to 9.3% for continuing operations. However, the group noted that comparable sales growth for the division was 7.3% over the 53-week period.

Shoprite’s top-market Checkers and Checkers Hyper chains, as well as its furniture division (OK Furniture and House & Home), are experiencing the strongest growth. However, the lower-end supermarket chains Shoprite and Usave reported a stronger second half, with sales growth of 12%.

Acquisition

The group will expand into the lower end of the retail market, with the acquisition of Massmart’s underperforming Cambridge Food, Rhino and Fruitspot businesses in something of a surprising deal announced late on Friday.

Its rival Pick n Pay was also in the running for Massmart’s low-end food retail chains.

Read:

Shoprite is known for taking over distressed chains and turning them around, capitalizing on his position as the largest food merchant on the continent.

The deal with Massmart will see Shoprite acquire 71 grocery stores, 43 liquor stores, the Fruitspot business and a meat processing plant. It is expected to be completed early in the first quarter of 2022, in the second half of Shoprite’s next financial year.

Departures

Shoprite has changed direction in recent years, choosing to double its main domestic market and cut, close or divest its operations in countries such as Nigeria and Kenya.

Read:

The group’s RSA Supermarket business opened a network of 87 stores over the 53-week period, according to its latest business update.

Shoprite also notes in the update that “in line with the group’s Non-RSA [business] review process ”its operations in Madagascar and Uganda have now been classified as discontinued.

“Non-RSA supermarkets continued to operate in regions challenged by macroeconomic and consumer affordability constraints, exacerbated by the impact of Covid-19 restrictions and regulations. Despite these factors, constant currency sales from continuing operations [in this division] increased by 6.8%. ”

However, Shoprite says the currency devaluation continues to weigh on reported sales at its operations in the rest of Africa.

“In rand terms, Supermarkets Non-RSA sales from continuing operations decreased 7.5%,” says the group.

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