Shoprite interim H1 2021 results: sales up 4.7%; sales outside SA down 8.4%

Shoprite has released its results for the 26 weeks to the end of December 2020. Across the group, sales are up 4.7% to R83.4bn ($5.57m). There is a sharp contrast between performance in South Africa, where its supermarkets saw sales increase by 5.6%, and supermarket sales from outside South Africa which declined 8.4%.

Shoprite’s South African supermarket sales make up 78.0% of group sales. This includes sales from its 1,685 stores under the Shoprite, Usave, Checkers, Checkers Hyper and LiquorShop banners. Because of alcohol sales bans during the COVID-19 pandemic, alcohol sales fell by 21.8% compared to the same period the year prior. Shoprite, like other South African retailers, points out that it lost 79 out of 182 possible trading days in the period. When you exclude LiquorShop sales, Shoprite’s sales in South Africa grew by 7.8%. Like for like sales are also up.

Shoprite is clear about the root of its success, which has seen its market share grow in each of the past 22 months: price leadership. Price inflation for its core basket of 15 foods saw inflation of just 0.7% against inflation rates of 4.9% for food nationally. It has not raised the price of its entry level bread loaf in the past five years. to reinforce its price credentials, Shoprite launched its new loyalty scheme called the Xtra Savings Rewards Programme in Oct 2020. The scheme will be rolled out over the next 12 months but has already reached 825 stores – around half of Shoprite’s supermarket store network in South Africa. The scheme offers 9,000 grocery deals every month and has 17m shoppers as members.

The real problem is outside South Africa, although Shoprite says its non-SA operations are self-funding.

Shoprite has now confirmed it has sold 100% of its stake in its Nigeria stores and it has also fully closed down in Kenya. Nigeria alone accounted for 13.9% of its unsold stock (inventories). Those two countries are not reflected in its results. Nonetheless, sales are sharply down in Rand terms from Shoprite’s largest non-South Africa markets, mostly because of currency devaluations.

  • Angola: -15.5% in constant currency (-39.5% in Rand)
  • Mozambique: -2.9% in constant currency (-6.1% in Rand)
  • Namibia: +3.7% in constant currency (+3.7% in Rand)
  • Zambia: +15.8% in constant currency (-12.7% in Rand)

The deterioration of Shoprite’s sales profile in Angola is an issue although Angolan operations repatriated $58.8m in the past 12 months thanks to government bonds and bills. Shoprite has incurred trading losses in Angola from 2018 to 2020. At some point CEO Pieter Engelbrecht may decide to do what he has done in Nigeria and pull the plug. In 2021, GDP is forecast to grow by 3.2% in real terms. Consumer prices are forecast to rise by 20.6%. The recovery of oil prices will provide Shoprite with some optimism but any recovery in sales won’t come in FY2021 and probably not in most of FY2022.