South Africa's Shoprite will spend $440 mln to support market share growth (updated)

Spar

05/09/2023 08:17

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      Shoprite to spend over $440mln in capex
    

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      Posted almost 10% rise in annual profit
    

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      Share price slips almost 6% on day
    

  
 (Recasts after results presentation)
    By Tannur Anders and Nqobile Dludla
       JOHANNESBURG, Sept 5 (Reuters) - Shoprite  SHPJ.J  plans
to spend about 8.5 billion rand ($443 million) to increase
supply chain capacity, add stores and strengthen its digital
capability, South Africa's biggest supermarket group said on
Tuesday after posting a 9.6% rise in annual profit.
        The retailer has been swallowing market share from
rivals Pick n Pay  PIKJ.J  and SPAR  SPPJ.J , while pushing into
the higher-margin upmarket niche dominated by Woolworths
 WHLJ.J .
  
        But rivals have been innovating and expanding capacity
in a fiercely competitive grocery market, forcing Shoprite to
step up a turf war for both budget and affluent shoppers.
  
        The company is adding 200,000 square meters in new
distribution centres over the next two years to support growth
at its over 2,100 South African supermarket stores and
additional 314 new stores planned in its new financial year,
which started on July 3.
  
        With its one-hour grocery delivery service Sixty60
dominating the on-demand grocery delivery market, the company
will launch a 99 rand per month subscription model, a first for
grocery retailers, to help snatch more than the 15% market share
currently held by its affluent Checkers brand.
  
        "The fact that there is currently no economic growth...
doesn't mean we can stop investing. Because if you stop
investing, to start again in the future is a slower start,"
Chief Executive Pieter Engelbrecht told investors on Tuesday.
  
        Shoppers flocked to its stores for bargains, with
customer visits up 13.2% in the year, while volume grew by 4.9%.
This boosted Shoprite's market share growth by 1.4% and
contributed to overall sales growth of 16.9% at 215 billion
rand.
  
        Its headline earnings per share from continuing
operations grew to 1,166.2 cents in the period even as it spent
1.3 billion rand on diesel for back-up power generation, as
state utility Eskom struggles to keep the lights on.
  
        The company's share price fell 5.73% by 1217 GMT.
  
        "When investor expectations are too high, as was the
case with (Shoprite), some level of disappointment creeps into
the price once the CEO starts talking," Casparus Treurnicht,
portfolio manager at Gryphon Asset Management told Reuters.
  
        "This was a classic example of the share getting ahead
of itself," he added.
  

($1 = 19.1670 rand)

 (Reporting by Tannur Anders, Editing by Louise Heavens, Nqobile
Dludla, Alexander Smith and Nick Zieminski)
 ((Tannur.Anders@thomsonreuters.com;))