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Retail

Shoprite's Home Focus Bears Fruit As Profits And Market Share Grow

Shoprite Holdings' homeward pivot is showing signs of paying off as the group reported a jump in half-year group profit and increased domestic market share in South Africa after dialling back its continental expansion.

South Africa's biggest grocer has been reviewing its long-term options across Africa over the past year as currency devaluations, lower commodity prices and high inflation have hit household incomes and weighed on earnings.

This has led to the company exiting Kenya and Nigeria, restricting capital allocations to its supermarkets outside South Africa and instead investing that money in its home business, to take advantage of its dominance in the discount grocery market and growing share in premium food.

Its South African supermarkets business has achieved 22 months of uninterrupted market share gains, chief executive Pieter Engelbrecht said on Tuesday.

Star Performers

One of the star performers was its upmarket Checkers chain, which has been investing aggressively in its same-day-delivery online grocery service and expanding new-format stores with premium fresh food and produce to challenge Woolworths' dominance in that area.

That business, which contributes 40% to the South African business, increased sales by 11.1% in the six months to 27 December.

Overall sales in its home market, which accounts for the bulk of the company's income, grew by 5.6%, also buoyed by a strong performance from it discount Usave chain.

Across all of its businesses at home and abroad, Shoprite's diluted headline earnings per share (HEPS) from continuing operations rose 10.4% to 418 cents. After adjusting for foreign currency movements and hyperinflation HEPS grew by 17.1%.

Regional Performance

The retailer's business in the rest of Africa turned profitable, aided by the reversal of some impairment provisions, but sales declined 8.4% in rand terms due to ongoing currency devaluations in certain key places like Angola.

In constant currency terms, sales inched up 0.9% on stronger performances in Zambia, Ghana and Namibia.

No further significant disposals or exits from the continent are expected in the short to medium term, finance chief Anton de Bruyn told investors.

'Long-Term Strategy'

"It is still our long-term strategy to retain a core set of non-RSA (South Africa) profitable countries," Engelbrecht added.

Shoprite, with more than 2,300 stores across Africa, is awaiting regulators' approval on the sale of its Nigerian supermarket operation, although no further details were disclosed about the deal.

"Management is in the process of concluding a franchise agreement for the Shoprite brand to remain in Nigeria as well as an administration and services agreement to provide support to the new shareholders with operating the outlets," the company said.

News by Reuters, edited by ESM. Click subscribe to sign up to ESM: European Supermarket Magazine.

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