Shoprite will accelerate the rollout of its standalone Medirite Plus pharmacies with 56 planned in the medium term, but this will depend on how fast it secures space next to its grocery outlets. The company has 120 pharmacy licences.
The speed of the rollout “will be determined by how quickly we can get those good premises that are close to Shoprite/Checkers. So, we currently have 21 (Medirite Plus) standalone stores, and we have got a plan for 56 in the medium term, depending on how quick we can get the sites,” said CEO Pieter Engelbrecht.
Over the years, Shoprite has slowly been building its adjacent business that includes pets — Medirite in-store dispensaries, Medirite Plus standalone retail pharmacies, pharmaceutical distributor, Transpharm, pet business Petshop Science, baby stores Little Me, Checkers Outdoor and also clothing UNIQ
Engelbrecht said while “small in the context of our group, our organically developed adjacent businesses increased sales by 70.9%, broadening our value proposition and increasing our share of wallet.”
Its greenfield and fastest growing business, Petshop Science with more than 170 stores, “continues to advance strongly, aided by its transition to the Sixty60 on-demand delivery platform.”
Commenting on UNIQ, which has 32 stores, Engelbrecht said expansion of stores will be measured.
“The thing with unique, we can’t open as fast as we want because you have to buy stock a year in advance. So, we already bought next year’s summer’s clothing. So now you can’t just go indiscriminately and open stores. Where are you going to get stock?
“So it’s a measured growth approach. A little bit similar with the Pharmacare because we want to be closer to Shoprite and Checkers because they do all the hard work of attracting customers then you feed off it. Pet is a bit easier because it’s a smaller footprint, and then more of those locations are available. All of these are in motion but running at different speeds.”
Competition in the pet industry has intensified in recent years and has become the fastest growing segment for major retailers. Woolworths said this week Absolute Pets has opened its 200th store and continues to record strong growth.
Shoprite continued to extend its market share in the six months to December. It increased merchandise sales in the six months to December by R9.2bn to R136.8bn. The SA supermarket operations, which contribute 84% of group sales, grew merchandise sales by 7.1% to R115.3bn led by Shoprite and Usave.
Within Supermarkets RSA, the Sixty60 on-demand digital platform continues to drive sales growth and customer adoption, recording sales growth of 34.6% to R11.9bn. Sixty60 contributes 10% to total SA supermarket sales.
Woolworths reported a turnover increase of 5.2% to R41.6bn, for the six months to December while profit before tax was down 23% to R2bn. The group said profit growth was constrained by the strength of the rand, in addition to weaker currencies in some of the African markets in which it operates.
The Food business continues its stellar performance with turnover up 6.7% to R26.6bn. Fashion, Beauty and Home (FBH) grew turnover by 6.1% to R8.1bn. Profit before tax at the food business was up 2.7% to R1.6bn while at FBH it rose 3.1% to R601m.
“Our first half results reflect the significant progress we have made in our strategic initiatives and demonstrate that we are clearly and deliberately shifting the trajectory of our businesses,” said Woolworths CEO Roy Bagattini.
Stephan Erasmus, investment analyst at Anchor, said Shoprite’s results showed a growing customer base and market share. “Despite low internal selling price inflation, Shoprite delivered a credible financial performance. Woolworths told a more nuanced story: the South African operations are genuinely improving, but the Australian operations weighed on what was otherwise a solid result.”
He said Shoprite’s African operations disappointed with ongoing profitability pressure, however management is busy exiting various portfolios to optimise performance and returns. “For Woolworths, the concern is Country Road Group in Australia. Where the Australian consumer remains under pressure, and promotional activity is high.”
Shoprite operates in seven countries including Eswatini, Angola, Lesotho, Botswana. It is exiting Ghana and Malawi and is reviewing its Mozambique operation.
Engelbrecht said “we have rationalised the countries that we needed to be in … the one that we have to check is Mozambique. Mozambique has had a tough time — with the floods now in the south, that war up in the north, the gas project is not coming off, so it’s just something we have to watch. We have not spent much capital in that country for that reason. So that’s about where we are with African operations.”
Casparus Treurnicht, portfolio manager and research analyst, at Gryphon Asset Management said Shoprite is doing a lot on many fronts and together with Woolworths taking market share from Spar and Pick n Pay “due to their inefficient operations”.
“Shoprite is probably going to remain at the forefront due to their diversified exposure to various levels of the SA consumer. We as a country should do better to uplift economic growth, then we will see retail booming again. For now, I think it will be high single digit figures at best for one or two retailers. Shoprite will in most likelihood remain to be one of them.”
Commenting on the outlook for the companies, Erasmus said Shoprite heads into the second half in good shape with a “widening competitive moat and a digital commerce business approaching meaningful scale. In Woolworths’ case, Country Road’s turnaround is central to its investment case.
“More broadly, stubbornly low food inflation and an intensely competitive retail landscape have become defining features of the South African food retail sector, with consumers increasingly spoilt for choice.”
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