Shoprite outperforms market in second half

Pieter Engelbrecht, chief executive officer:

Our core operations, Supermarkets RSA’s sales growth of 4.9%, with like-for-like sales growth of 1.9%, is a performance significantly impacted by our well documented first half challenges. With the strike in the DC behind us, our team worked tirelessly to restore performance in the second half. It is pleasing to report that we ended the year with our final quarter’s sales in Supermarkets RSA growing by 9.4%. Our in-stock levels are now higher than prior to our system implementation and without compromising on our low price leadership, we achieved a second half trading margin in Supermarkets RSA of 5.5%.

We’ve continued with our growth strategy to capture a larger share of the premium food segment through the ongoing Checkers repositioning. The number of Checkers stores in the new look FreshX format now totals 21. We are most pleased with returns from these upgrades and, therefore, our medium to long-term target of 80 stores in this format remains unchanged. Our focus on the core Shoprite and Usave customers, who we strive to serve with excellence daily, has remained strong as we continue to bring affordable food retail into the communities where our customers reside.

Notwithstanding the much improved recent performance in our core Supermarkets RSA division, which generates 74.9% of our sales and grew second half sales by 7.4%, it was a testing year. A constrained economy, inventory shortages post industrial action and the implementation of a new enterprise wide IT system across our store base resulted in lost sales. With affordability remaining the top priority for our customers, we unquestionably stood by our lowest price promise. Selling price inflation in our Supermarkets RSA division for the year measured only 1.2%, and similar to last year, we traded throughout the year with many items in key categories in deflation. At year-end, the number of products priced lower than last year measured at 9 679.

Ongoing forex shortages, currency devaluations and the aftermath of rampant inflation in Angola and its ongoing impact on affordability took a further toll on our Non-RSA business. Supermarkets Non-RSA reported a trading loss of R265 million for the year. Despite no foreseen respite in short-term trading conditions in the region, we are committed to our customers in the 14 Non-RSA countries in which we operate. We remain confident in the opportunity our entrenched position as Africa’s leading food retailer will bring as the economic fortunes of the countries where we trade improve. Given the challenging global economic backdrop, we are remaining focused on growth opportunities in our home market, inclusive of our established African operations, rather than pursuing businesses in foreign geographies.

Social responsibility has and always will be a priority for the Group. Amongst many initiatives focused on improving the lives of our fellow South Africans, it is noteworthy that this year we sold a record of 53 million subsidised deli meals and 58 million loaves of brown bread, both for under R5. We also created a further 3 175 employment opportunities whilst improving our focus on sustainability and governance. I am pleased to be able to say that we have the right people, resources and plans in place to entrench and grow our leading food retail position, both in South Africa and on the rest of the African continent and, therefore, to grow our profitability over the long term.