Tawanda Karombo
Shoprite has reported an impressive growth in sales volumes across its operations for January, continuing the momentum from its robust performance in the half year ending December 2024.
The supermarket chain, renowned for its strategic investments into IT systems and customer rewards programmes, appears well-equipped to withstand the pricing pressures currently impacting the retail sector.
While its rivals flounder and shift towards budget offerings and rationalising operations through closure of non-performing stores, Shoprite is growing its footprint.
This is helping it trump up the competition, with sales volumes for the first month of the second half year to June 2024 registering a further uptick.
“For the first month of our second half period, January 2025, sales growth in our core SA supermarkets segment remains ahead of that reported for the first half 2025,” said the company on Tuesday.
The SA supermarkets division’s internal selling price inflation for January improved to 3.1% compared to 6.3% in January 2024.
Falling interest rates and moderating inflation has provided some respite to SA consumers, breathing some spending impetus into their pockets and Shoprite looks to benefit from this.
Although Stephan Erasmus, investment analyst at Anchor Capital, said Shoprite had “narrowly missed its earnings expectations for 1H25, the outlook for 2H25 remains strong” for the company.
In the half year to December 29 2024, Shoprite’s revenue rose 9.4% to R130.8 billion, driven by a 10.4% surge in SA supermarkets division that now accounts for 82.3% of total revenue.
Diluted Headline Earnings Per Share (DHEPS) for the interim period grew 9.9% to 659.9 cents, with the retail operator raising its half year dividend by 6.7% to 285 cents per share.
With selling price inflation at 1.9% for the period under review, gross margins in Shoprite improved to 23.9% from 23.6%, with the trading profit for the half year rising by 13.5%.
“In the context of selling price inflation of 1.9%, this quantum of additional spend, equating to 10.4% increase in sales was underpinned by strong volume growth as a result of across-the-board gains in the number of customers; customer visits and average basket spend,” said Pieter Engelbrecht, CEO of Shoprite.
Erasmus said Shoprite’s investment in pricing led to an 11.2% increase in promotional volumes, which is evident in the 1.7% rise in selling prices compared to the headline food inflation rate” of 3.7%.
“Despite facing pricing pressures, SHP produced solid results in the first half of the year, improving gross margins by 0.3%. These improvements indicate that the investments in IT systems, live pricing, and rewards programs are beginning to yield tangible benefits,” said Erasmus.
Shoprite is expecting further volume growth in the second half year period to June off a high base growth of as much as 10.1% for the comparative period to June 2024.
Although lower food inflation and reduced interest rates had offered consumers a much-needed reprieve to the increased cost of living they have faced in recent years, Shoprite believes that SA shoppers are still in search of “best prices, value, range and on shelf availability when they visit” its outlets either in store or online.
“We are of the view that regardless of where we are in the economic cycle this is unlikely to change,” said the company.
To position for this, Shoprite opened a net number of 283 stores during the past 12 months. Customer visits for the half year period increased by 4.1% while the average basket spend increased by 6.1%, with private label brands featuring in a number of categories across all of the SA grocer’s supermarket chains.
BUSINESS REPORT