Shoprite keeps focus on local operations
Shoprite is keeping its focus firmly on its home market as it retreats from its Nigerian and Kenyan operations, but it remains on the lookout for potential deals.Shoprite CEO Pieter Engelbrecht said this week: "There is a lot for us to still develop and innovate and get value from here [in SA], but I am always looking for an opportunity." Shoprite's ambition is to continue its impressive growth trajectory in its core South African business. "I see that a lot of retailers are moving back to their home markets. Very few have been successful outside of their home markets and that includes Walmart and guys like Tesco," he said. There was a "secondary notion to that", which was that governments were trying to protect their own markets. This had been exacerbated by the Covid-19 pandemic and border controls that were instituted."Governments are now trying to protect their own countries. They don't really want foreign companies to come and import stuff into the country, change their account balance and then repatriate the money. "There is globally more focus on core markets and there is more value to extract by offering your customer additional services, revenue streams and other options. Just look at what Amazon has done. You don't have to limit yourself to only selling chicken, for instance," Engelbrecht said. Shoprite's South African business, which accounts for 78% of the group's total sales, delivered an 8.7% increase - of R9.8bn - in sales to R122.4bn for the 52 weeks to June 28. The gains were across all brands - Usave and Shoprite and Checkers, with the latter gaining affluent customers. Engelbrecht said the group, which has recorded 16 months of consecutive growth, increased its market share by R5bn to 31.6% in SA in the past 12 months, of which about R1bn was from the fresh foods section, showing that brands such as Checkers were making inroads into the more affluent segment of the market. FNB portfolio manager Wayne McCurrie said Shoprite delivered "a very good result with incredibly strong cash flow . They are doing very well in SA."He said Shoprite could be taking market share from Pick n Pay, but probably not Spar, whose turnover growth was similar to Shoprite's. Investment analyst Chris Gilmour said Shoprite was "certainly taking market share from Woolies [Woolworths] in the convenience food sector. They've done very well on that."It might also have taken market share from independent grocers as "these guys were not really able to do so well during lockdown. They just didn't have the financial muscle in many instances to carry on".Richard Cheesman, senior analyst at Protea Capital Management, said he was "happy to see a local company paying dividends, which is not that common at the moment"."It's a good business. Shoprite has dialled back the capex a bit. Working capital was also strong and that helped the balance sheet," said Cheesman.Shoprite plans to exit Nigeria and Kenya by the end of the year, citing their lack of profitability, but will not do "a blanket exit" from other African operations, Engelbrecht said. Operations in Zambia, Mozambique and Angola would be assessed case by case."We are going to restrict the capital until we see a little bit of stability" on exchange rates. Asked if he would ever look at making a play for Walmart-owned Massmart in SA, Engelbrecht quipped: "I think I will be the last person on earth that they [Walmart] would be prepared to sell to. I don't think they look at me in a very friendly way, but my eyes are still looking." "I look at everything. I first look and then I say OK, no, I don't think so. I never say no before I've had a look. Everything is negotiable."