Shoprite investing ‘heavily’ for recovery
…JOHANNESBURG – Although the after-effects of the recession will be felt for a long time to come, listed retailer Shoprite is investing “heavily” for the recovery when it comes.
Releasing its results for the 53 weeks ended June 2010 on Tuesday, the group said it envisaged opening 85 new stores in the new financial year and it would invest more than R3 billion over the next four years in its systems and logistics infrastructure.
Shoprite said its trading profit was up 18.7 percent to R3.490 billion, while turnover increased 13.6 percent from R59.319 billion to R67.402 billion.
Diluted headline earnings per share rose 15.6 percent to 451.6 cents, while a dividend per share of 147 cents was declared.
“During the period under review, the group continued to build on its historical price positioning, which is to consistently offer low prices on the most important basic foods,” said chief executive officer Whitey Basson.
By sticking to these principles, the Shoprite group had been able not only to retain the loyalty and support of customers across the spectrum, but also to extend its customer base.
“In doing so it outperformed the rest of the sector and grew market share further to 32.6 percent,” Basson said.
By controlling costs in all areas of the business and obtaining further efficiencies from its investment in systems and logistics infrastructure, the group managed to increase its trading margin from 4.96 percent to 5.18 percent.
Turning to its operating environment, Shoprite said consumers had remained price-sensitive due to the high rate of unemployment and personal debt. “The benefits of the substantial drop in food inflation and the highly competitive prices of imported durable goods were largely offset by the sharp rise in the cost of living expenses across a broad spectrum, from energy and transport costs to municipal rates and taxes.”
The Soccer World Cup, coming at the end of the group’s reporting period, engendered in South Africans an invigorating sense of optimism in the future of the country although the event as such did not have a noticeable effect on food retailing, the group said.
“Tumbling internal food inflation at 0.2 percent in the latter half of the year brought prices back to what they were a year ago and while positive for consumers, especially those in lower income groups, the virtual absence of food inflation placed pressure on food retailers in a market of suppressed sales and escalating costs.”
Looking ahead, the group said management did not expect market conditions to change markedly in the months ahead as the country’s economic recovery was expected to lack real momentum.
“With most of the country’s major infrastructural projects completed, job losses are expected to continue.”
Shoprite said rising input costs were expected to affect food inflation, which was bound to start rising in the second half of the new financial year.
“However, the group expects to continue growing turnover and trading profit at comparable levels and to this end continues to invest in staff development, new stores and infrastructural capabilities.” – SAPA
