Shielding customers from rising costs sees Shoprite win while rivals struggle

Shoprite, South Africa's biggest supermarket group, reported a 7.6% rise in half-year profit on Tuesday and continued to win market share from struggling rivals with its competitive pricing.

The retailer, which has more than 3,500 stores across Africa, has been gaining market share at the expense of competitors Pick n Pay and Spar, while pushing into the higher-margin upmarket niche dominated by Woolworths.

Shoprite said customer visits rose by 6.9% and item volumes by 5.1%, with market share gains of R4bn in the 26 weeks ended December 31.

This extended its uninterrupted market share gains in its core South African supermarket business to 58 months.

Group sales rose by 13.9% to R121bn, with sales at Supermarkets South Africa, which accounts for more than 80% of the group's revenues, growing ahead of the market by 14.6% to R97.5bn. Sales at discount brands Shoprite and Usave and upmarket brand Checkers also grew by double digits.

The core business benefited from the acquisition of 94 stores from Walmart-owned Massmart.

Shoprite said it continued to absorb some rising costs to shield customers, with its selling prices up 7.7% in the period compared with official national food inflation of 8.7%.

"We took a decision not to pass the price increases onto consumers as fast as they were passed onto us," group CEO Pieter Engelbrecht told investors.

With some input costs coming down, the group grew gross margin slightly to 23.6%. Its diluted headline earnings per share came in at 621.4c.

Engelbrecht said the group had identified new sales opportunities in categories such as personal care, general merchandise and healthcare, where there was room for growth.

"There lies a good growth for us in the grocery business. [We need to] get those categories up to where our average market share is for the group."

Reuters