Shoprite 'needs Africa upgrade'

Johannesburg - Retail giant Shoprite Holdings [JSE:SHP] needs a more aggressive African expansion strategy to maintain its present level of growth, analysts said on Wednesday.

Shoprite posted sales figures for the six months to end-December on Wednesday, reporting an 11.9% turnover growth to R33bn - below market expectations.

While local sales were 14.6% up, turnover in operations outside South Africa were negatively affected by a strong rand, resulting in a 4.3% decline in rand terms.

BoE retail analyst Shanay Narsi said the figures were "weaker than expected, a bit disappointing, but not a bad performance", given trading conditions.

Narsi acknowledged legislative and infrastructural challenges faced by the group in its Africa expansion, but said Shoprite needed to push a little harder in its continental expansion.

Furniture division surprise

"They've got to put up more stores. Space expansion is going to be necessary to maintain the rate of growth we've seen in recent years," he said.

Coronation Fund Managers' Quinton Ivan said Shoprite was well positioned for growth in Africa, despite difficulties in finding trading space.

"Most retailers in Africa are independents, so there is scope for formal retailers like Shoprite to grow," said Ivan. He mentioned Nigeria, with its fast-growing population, as another growth opportunity for the retailer.

In the update, Shoprite said sales in its furniture division grew by 11.5%. This figure surprised analysts, given the sector's overall performance. Ivan said this was probably due to the group's cash-orientated OK Furniture, while Narsi did not rule out the possibility of markdowns.

On Wednesday noon, Shoprite was trading down 0.12% at 6 447 cents per share, from an opening of 6 487c.

- Fin24.com