Shoprite shrugs off Walmart
There was only one mention of Walmart in Shoprite's results presentation yesterday.
It was part of a Facebook Timeline music montage about Shoprite's history - a status-update by chief executive Whitey Basson that read something like: "Where is Walmart?"
So far, Shoprite seems to be shrugging off the US retail behemoth's widely expected challenge to its market by simply growing.
Basson's South African - and increasingly pan-African - giant increased its trading profit by 17% to R4.67-billion in the year to the end of June. It increased its turnover by 14.4% to nearly R83-billion in what Basson yesterday described as "a difficult year".
"The macro-economy didn't do much to support our results," he said, pointing to pressures on disposable incomes and low consumer confidence in South Africa, which contributes nearly four-fifths of the group's turnover.
Shoprite is concerned about higher grain costs because they would have a knock-on effect on the prices of chicken and other products.
The company claimed that its internal food inflation was 4.9% and lower than the official food price number of 8.8% in the year.
Both Basson and his deputy managing director, Carel Goosen, said they were pleased with the results even if analysts were less so.
Massmart - Walmart's recently acquired South African subsidiary - will release its results today and Woolworths the day after that, giving more context to Shoprite's numbers.
Shoprite's success seems to hinge on three broad trends:
- Increased social security spending by the government - the recipients spend a large proportion of it on food;
- Strong expansion into the rest of Africa, which is not as susceptible to economic downturn as elsewhere; and
- Taking market share from rivals, specifically their customers in the higher-income groups.
The group's African expansion continued, with 21 stores opened last year. It now has 156 stores in 16 countries outside South Africa and increased its turnover outside the country by more than 25%.
"Of our top 10 stores, three are now outside South Africa," said Basson.
Asked about further expansion, he said Shoprite is "definitely not going to China, the fight is fierce. I don't think too many people are making money there.''
In South Africa, Basson still sees some good opportunities and expects Checkers to outperform the market.
The brand is gaining traction among higher-income earners and now has nearly two-thirds of its customers in LSM 8-10, up from 40% five years ago.
The company has increased its market share every month since July to an average of 34.1% for last year.
It has had six consecutive years of market-share growth and 23.2million people now say they shop at Shoprite group outlets.