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Shoprite still leader of the pack

Johannesburg – Shoprite Holdings [JSE:SHP] continues to assert its market leadership, analysts said on Thursday, after the group posted impressive sales figures for the financial year to end-June 2010.

For the 53-week trading period to end-June 2010, Shoprite said its turnover at R67.4bn was 13.6% up compared with the 52-week trading period last year. Stripping out the effect of the additional week, turnover would be 11.1% higher from last year.

Growth on a like-for-like comparison was 4.8%. During this period internal food inflation was 2.2%, compared to 15.8% in the last corresponding 12-month period.

"This is good news for Shoprite - a definite surprise, especially in their furniture division," said Avior Research retail analyst Simone Kruger.

Shoprite said the South African supermarket division - its core operation - grew sales by 14.6% or 12% on a 52-week comparison. Sales in the 106 supermarkets outside SA declined by 2.1% or 4.3% on a 52-week basis, due to a strong rand.

The OK Furniture division reported a 16.7% sales growth or 14.4% on a 52-week basis, in an environment characterised by reduced consumer spending.    

"Good numbers, but expected on the supermarket division and Africa; OK Furniture was a bit surprising. It remains to be seen whether this was due to discounting or store roll-out," said Shanay Narsi, an equity analyst at BoE Private Clients.   

Kruger said OK Furniture numbers were in line with figures recently reported by Statistics SA – a 17.7% spike in retail sales of household furniture and appliances in May – saying consumers were benefiting from low interest rates.    

According to Narsi, Shoprite's supermarket division seemed to be benefiting from the Money Market business which includes Computicket. Narsi said the business has grown quite well over the past few years, and was a margins enhancer for the group.

He added that the volume growth suggested Shoprite might also be gaining market share from its archrival Pick n Pay Stores (JSE:PIK] and independent retailers.  
 
While agreeing Shoprite was ahead of its competitors, Kruger said Pick n Pay was a good medium-term investment at the moment.

After ditching its loss-making Australian business Franklins, Kruger said Pick n Pay "has a lot of catch-up to do" in the next four years. It will be assisted by its aggressive store rollout and capacity building in distribution centres, she said.  

 - Fin24.com

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