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Shoprite reports higher sales, signals Nigerian exit

Business Maverick

Business Maverick

Shoprite reports higher sales, signals Nigerian exit

Despite a strong performance, there are various issues causing a drag on the Shoprite share price, and whether it is a ‘buy’ or not is debatable.( Photos: Gallo Images / Luba Lesolle)

The retail sector is not an unremitting tale of Covid and lockdown woe. Shares in Shoprite, Africa's biggest supermarket group, shot up on Monday 3 August after the company reported higher sales and signalled its intention to divest from Nigeria. 

In a trading update for the 52 weeks to 28 June 2020, Shoprite said total sales rose 6.4% compared to the same period the previous year to R156.9 billion. In South Africa, as a result of lockdown, the company said customer visits declined 7.4% but the “average basket spend” increased 18.4%. 

As a result, Shoprite expects its headline earnings per share to be between 1.6% lower and 6.4% higher for the year. Its shares leapt over 11% on the news. 

Compared to most retailers, supermarkets have been relatively fortunate. They remained open for business even during the hard lockdown month of April. At the end of the day, people have to eat, and middle-class households may have spent more on food than usual in the absence of other goods and services to purchase. 

The trading statement also provides a revealing if unsurprising look at consumer behaviour as the lockdown loomed. 

“The two weeks preceding South Africa’s initial 35 days of Level 5 lockdown resulted in elevated sales growth across all three of our supermarket brands but noteworthy was the significant growth reported by our repositioned mid-to-upper end Checkers,” the company said. Anecdotal reports that consumers who could afford to do so were stocking up – with some accused of hoarding – are now supported by data. 

Shoprite also revealed the costs it has incurred dealing with the pandemic and protecting its employees, customers and service providers. The company has spent R327.2 million on PPEs, sanitation, mobile clinics and other Covid related measures, “including R116.9 million paid to our employees, inclusive of an appreciation bonus to assist them with the difficulties we anticipated would accompany the nationwide lockdown.”

So to its credit, Shoprite has shown appreciation to frontline staff like cashiers who have exposed themselves to health risks so people can shop for food and other goods. 

Shoprite, which has more than 2,800 outlets across Africa, also announced its intention to depart Nigeria, Africa’s most populous country and biggest economy. This follows the exit of Mr Price and Woolworths, which suggests that despite its size, the Nigerian market is not smooth sailing for South African retailers. 

Still, someone sees its potential.  

“Following approaches from various potential investors, and in line with our re-evaluation of the group’s operating model in Nigeria, the board has decided to initiate a formal process to consider the potential sale of all, or a majority stake, in Retail Supermarkets Nigeria Limited, a subsidiary of Shoprite International Limited. As such, Retail Supermarkets Nigeria Limited may be classified as a discontinued operation when Shoprite reports its results for the year,” Shoprite said. 

Shoprite, which has spent 15 years in Nigeria, said sales in Nigeria for the period fell over 6% in Nigerian Naira terms and over 12% if the currency’s depreciation was taken into account.

Nigerian website Nairametrics reported that the retailer has been struggling in Nigeria in recent years owing largely to increased competition and government policies such as border closures and local production of consumables. BM/DM

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