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Shoprite rallies, jumps most since 1997

Jul 30 2019 19:18
Sibongile Khumalo & Bloomberg

Shoprite [JSE:SHP] rallied the most in 22 years after Africa's largest food retailer said second-half sales climbed as it took market share.

Sales in the second half rose 6.5% as its core SA business returned to full operational strength, the Cape Town-based supermarket operator said in a trading update on Tuesday.

Local operations grew sales by 7.4% in the six months to June and 9.4% in the final quarter. However, supermarkets outside the country saw a 7.7% decline in turnover, impacting overall performance, which Shoprite attributed to currency devaluations in major African countries where it trades.

Angola’s supermarkets, the largest contributor in Shoprite’s non-domestic portfolio, saw sales decline 38.4% in rand terms.

The owner of chains including Checkers and U-Save introduced a new IT system and faced some industrial action in its first half. In the second six months, product availability improved significantly and surpassed levels that it had before the new system was installed.

Shoprite has more than 2 500 stores throughout Africa, but a considerable majority are in South Africa. The retailer plans to open 88 stores in the next year.

Elsewhere in Africa, Shoprite is also seeing positive momentum after problems such as currency devaluations and shortages drove up costs. Shoprite says it’s still optimistic about the long-term food retail opportunity on the continent.

Market reaction

The stock rallied as much as 15%, the biggest intraday gain since October 29, 1997, according to Bloomberg. By 12:11 on Tuesday, shares were changing hands at R11.23, up 7.71%.

Before today’s statement, the shares had dropped 32% this year.

Standout performers

Shoprite said alcohol sales had also recorded strong growth in the 12 months to June, despite a challenging period for foods as felt the pinch in a weak economic climate.

Calling its alcohol division, LiquorShop, a "standout performer", Shoprite said it had added strong double-digit growth for the period, including increased appetite for liquor home delivery.

The retailer said it will this week open its 500th LiquorShop.

Online sales, which include Click & Collect orders and an on-demand liquor home delivery partnership, increased 386%, with rapid customer acceptance, the company said.

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