Shoprite sees better South African trade with market-share gains

Shoprite Holdings Ltd.’s second-half sales climbed as it gained market share, even as the main lower-income customers of Africa’s largest food retailer battle with the impact of an economic slowdown.

• Sales in its core South African business rose 9.4% in the last three months of the fiscal year through June, the Cape Town-based supermarket operator said in a statement on Monday. Still, the grocer spent R327.2 million ($19 million) on Covid-19 related costs.

Key Insights

• South Africa’s initial strict lockdown to help contain the coronavirus pandemic boosted Shoprite’s sales as grocers were among the few shops allowed to trade. The retailer had “significant growth” in mid-to-upper end shoppers. More shoppers have also been buying online. Its Checkers Sixty60 digital application, which was launched in a test phase in November, was expanded to 87 stores across South Africa by June. Because of restrictions and bans on liquor sales, second half alcohol revenue dropped 29.5%.
• The owner of chains including Checkers and U-Save is selling its distribution center properties and leasing them back to free up cash. That’s as it grows online sales and upgrades supermarkets to offer more fresh food. That deal is expected to be completed in the current first half.
• Elsewhere in Africa, Shoprite is considering selling its Nigerian operations. This process was initiated after the grocer said in November that it was reviewing its supermarket operations outside South Africa and would consider exiting certain countries if that would help reverse regional sales declines. The retailer has been battling currency-induced inflation surges in several other African countries.

Market Moves

• The stock rose 1% by Friday’s close in Johannesburg. That extended its decline this year to 17%, in line with the six-member FTSE/JSE Africa Food & Drug Retailers Index decline.

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