Shoprite Holdings, which owns the Shoprite, Checkers, OK and the franchise Usave grocery store chains, reported market leading 12% growth in revenue in the 52 weeks to June 30. Picture: Supplied
Shoprite Holdings, which reported its fifth consecutive year of outrunning the grocery market, said yesterday it would sell its furniture businesses to Pepkor Holdings for R3.2 billion, increasing the number of furniture stores in Pepkor’s stable by nearly half.
Shoprite reported 12% growth in revenue to R246.1 billion for the 52 weeks to June 30 and increased its full year dividend by 7.4% to 712 cents. CEO Pieter Engelbrecht said in a presentation they had seen 64 months of consecutive market share gains, a performance that outstrips that of any other major retailers in South Africa.
Notwithstanding the deal to sell the furniture business and the strong, market beating results, Shoprite’s share price declined 5% to R297.82 on the JSE yesterday afternoon, a large decline considering the All Share Index was down by only 0.97% at the same time.
Gryphon Asset Management research analyst Casparus Treurnicht said it was a good decision to sell the furniture businesses, as food retail had evolved and had become a much different business to furniture retail, which was slower moving, with stock sitting on the store floor for longer periods.
He said Shoprite had produced good results in difficult trading conditions, although sales in existing stores was slowing. He said the decline in share price was likely due to profit taking, and the fact that the share price had started the day relatively expensive at a price:earnings ratio of 28.
He said the share price had risen sharply recently from around R250 just before the National Election and was only at R100 a share three years ago. “Investors have done well,” he said.
The group, which operates Shoprite, Checkers, OK and the franchised Usave discount stores, opened 292 stores through the year and the plan was to open another 265 in the new financial year.
Engelbrecht said they decided to sell the furniture businesses because these needed substantial investment to reach the desired “scale” in the market, and Shoprite intended to focus rather on its grocery operations where it already enjoyed the benefit of scale. He expected the deal would be concluded next year.
Also, in pursuit of strategy to be Africa’s most profitable omnichannel retailer, advanced discussions were underway to purchase the remaining 50% shareholding in last-mile logistics provider, Pingo Delivery, he said.
Shoprite has signed an agreement to dispose of its OK Furniture and House & Home brands, excluding the Angola and Mozambique operations, to Pepkor - these comprise some 400 stores.
Pepkor is the owner of some 5917 stores including PEP, Ackermans and Refinery and 892 furniture stores under Pepkor Lifestyle, formerly known as JD Group. Pepkor said the acquisition represented about 4% of its market value, which is about R3.2 billion.
“With respect to our furniture business, we found ourselves at a crossroads with the business' future growth and profitability hamstrung by the requirement of a level of investment that would have resulted in us redirecting capital and project management resources away from that currently dedicated to our food retail operations,” Engelbrecht said in a statement.
He said the 12% increase in group sales equated to their core South African supermarkets customers spending R21.4bn more with the group this year.
“During a time when customers are incredibly pressured, this is the greatest reward for our efforts…growth of this nature, in a highly competitive market and from a high base, can only be achieved as a result of across-the-board commitment,” Engelbrecht said.
He said Shoprite and Usave, which met the needs of the group’s core customer base in the price sensitive market, increased sales 10.7% from a base of R90bn last year. This equated to an additional spend of R9.6bn in stores this year. Individually Shoprite increased sales by 10.3% and Usave, the limited assortment discount supermarket, increased sales by 13.2%
Checkers and Checkers Hyper’s sales grew by 12.3% through a year of 26 new stores and 12 store upgrades. Advances in fresh and private label development, with execution from Checkers Sixty60, reflected commitment to its 12 million Xtra Savings rewards customers, said Engelbrecht.
He said that as a result of their brand segmentation strategy, Shoprite and Usave met the needs of their customers in different ways, but a shared operational structure facilitated “best in-class” execution to meet the demands required at differing peak times for each.
Usave experienced the lowest sell inflation of all the group grocery businesses - 2.3% selling price inflation at its lowest in May 2024 - and its customer being the most stretched, Usave increased sales ahead of the group’s other top performing grocery businesses, which in themselves all grew ahead of the market, he said.
Shoprite's furniture business delivered sales growth of 2.3% to about R7.2bn to end-June, lagging the group’s 12% growth.
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