Thu, 20 Feb 2020

Shoprite's [JSE: SHP] half-year operational update reflects overall sales growth of 7%, despite a decline in the rest of Africa.

The retail group on Wednesday released its operational update for the six months ended December 29, 2019.

Shoprite's share price, which opened at R115.11 on Wednesday morning, rallied following the release of the update to trade 5.04% stronger at R120.69 by 11:11.

During the period the group added 66 stores to its supermarket business, bringing the total number of stores to 1 911. Its franchise division grew by 10 stores to 470.

The group's total sales increased by 7% to approximately R81.2bn, driven by growth in its South African supermarkets, up 9.8% for the period to R61.7bn.

"All three supermarket brands, Shoprite, Checkers and Usave, traded well in a tough market," the group said. Liquor sales also remained strong, having grown 20.5%.

However, supermarkets in the rest of Africa saw sales decline 3.1% (in rand terms) to R10.8bn. Shoprite pinned this on currency devaluations in these markets. "We have continued to experience ongoing currency devaluations and volatility in key markets in which we trade. The Angolan kwanza weakened by 40.6% against the US dollar since June 2019.

"During the reporting period, the Angolan kwanza, Zambian kwacha and Nigerian naira depreciated 40.4%, 20.8% and 18.2% respectively against the US dollar when compared to the previous year," the update read.

Shoprite shares in dramatic U-turn after update

Shoprite's furniture division also reported a decline of 2.7% to R3.3bn. This is mainly due to the reduction of the store base to 13. Load shedding in SA and currency devaluations in the rest of Africa also impacted the division's performance.

Other operating segments - which include businesses OK Franchises, Computicket, MediRite Pharmacies, Transpharm and Checkers Food Services - grew sales by 4.4% to R5.4bn.

During the period there was a six-week strike impacting Transpharm, a pharmaceutical wholesale business, impacting the performance of the segment. OK Franchises grew by 7.5%.

The group's interim results for the half-year period ending on December 29, 2019, will be released on February 25, 2020.

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