Regardless of many retailers being negatively impacted by the Covid-19-induced lockdown laws, the Shoprite Group gained market share and maintained a wholesome money movement – with its Checkers e-commerce and rewards programme attracting greater than four.7 million prospects.
The large meals retail group, which is made up of Shoprite, Usave, Checkers and Checkers Hyper and identified for its cheap meals costs, reported in its yr to end-June outcomes that gross sales jumped 6.four% to a “file” R156.9 billion.
This regardless of its liquor and furnishings retailers being closed throughout the lockdown.
It says its working section elevated gross sales by eight.7%, representing an R9.eight billion enhance to R122.four billion. The group reported a 20 foundation level enhance in buying and selling margin to five.three%.
The board has declared a ultimate dividend of R2.27, bringing the entire dividend for the yr to R3.83 from R3.19 in 2019.
It expanded by 147 shops comprising 101 company and 46 franchise shops over the interval.
The one downhill in its outcomes got here from its rest-of-Africa markets, the place gross sales declined by 1.four% in rand phrases.
The group mentioned this was primarily as a result of lockdown laws which affected retailer openings, days and hours of commerce, in addition to limiting transport in some international locations, impeding the flexibility of its staff and prospects to get to its shops.
The group has launched into a course of by which it would contemplate the sale of both a majority stake or all the shareholding in its Nigerian subsidiary after 15 years in that nation.
FNB Wealth and Investments senior portfolio supervisor Wayne McCurrie says though the outcomes of its African market weren’t as optimistic compared to the South African market, the group managed to not enhance its losses compared to final yr’s outcomes.
“The underlying operations didn’t do too dangerous, however the main problem was that the currencies decreased dramatically in opposition to the rand. Nevertheless, the optimistic factor concerning the African markets is that the loss didn’t enhance due to the lockdowns,” says McCurrie.
He highlights how the group’s outcomes point out how resilient the grocery retail market is. He believes they’ll proceed to achieve market share attributable to customers discovering Shoprite the higher possibility available in the market to do their grocery procuring as they’re cash-strapped because of the pandemic.
“They clearly gained market share throughout the lockdown and so they have good money movement as nicely, nevertheless, all of the retailers aren’t badly positioned for Covid-19 as a result of folks nonetheless store [for groceries],” McCurrie says.
Sasfin Securities deputy chair David Shapiro says it was anticipated that the group’s outcomes can be optimistic.
“They produced comparatively good numbers and I believe that in case you are wanting to buy retail shares, the Shoprite Group and Spar Group can be good corporations to purchase on this house,” Shapiro says.
He says the group’s higher hand is that it caters for the essential wants of customers.
“They’re in a greater place than a few of the different retailers as they offer you what you [consumers] want,” Shapiro says.
E-commerce and rewards an added benefit
In November 2019 Checkers launched its rewards programme, referred to as Checkers Xtra Financial savings. In line with the outcomes it has signed up four.7 million prospects since inception.
It additionally revealed that the shopper response to the launch of its Checkers Sixty60 one-hour grocery supply utility has been distinctive.
“These are engaging add-ons they’ve added which reinforce their model available in the market,” Shapiro says.
He says the benefit of the pandemic is that it has compelled customers to remain at dwelling and thereby compelled them to adapt to e-commerce.
“The one factor concerning the lockdown is that it sped up e-commerce that buyers confirmed resistance in direction of. The [need] for e-learning amongst customers elevated dramatically as a result of it needed to, and customers embraced it.
“Firms like Checkers broke down limitations throughout this era that will have taken them a very long time to do if it weren’t for the lockdown. So corporations similar to this – that have been forward-thinking and progressive earlier than the lockdown [benefitted] as a result of the extra they digitised, the extra they realized about their prospects,” Shapiro says.
Shapiro additionally notes the wholesome money movement of the group.
“What it highlights is that’s turning over its inventory, and that may be a essential measure of how it’s doing, so it implies that they don’t seem to be caught with inventory,” Shapiro says.
The longer term
The massive query is whether or not the group will proceed to keep up a optimistic steadiness sheet and its newly gained market as life returns to regular.
“That could be a very massive problem,” says Shapiro. “What occurs now as issues get again to regular? Persons are not compelled to be at dwelling anymore, will customers proceed with e-commerce?”
Shapiro says this one thing that ought to be watched carefully within the subsequent yr.