The race for reach is on - Shoprite Group CEO | Fin24
 
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The race for reach is on - Shoprite Group CEO

Aug 21 2019 07:16
Carin Smith

The race for reach is on, according to Shoprite Group CEO Pieter Engelbrecht.

"This means the winners will be the retailers that reach the most customers via the most media and the largest number of distribution models, and we have already illustrated that we want to go into precision retail," he told Fin24 on Tuesday afternoon.

Shoprite Group's market research indicates that Shoprite competes well for the position of lowest priced retailer, says Engelbrecht. At the same time, consumers understand the value proposition offered by the group's Checkers stores, he adds.

"We are aiming for the higher LSM market with our Checkers offering, since this market segment is more resilient in tough economic times," Engelbrecht told Fin24.

"We have gained market share, especially in fresh and convenience foods. We are looking at some new Checkers formats."

'Testing year'

The number of Checkers stores in the new look format now totals 21, and the group has targeted 80 stores to be upgraded in the new format during the medium to long term.

Earlier on Tuesday Fin24 reported that Shoprite announced net profit declined 18.2% to R4.2bn due to the group having faced a "testing year".

Basic headline earnings per share decreased by 19.6% to 780.8c and the total dividend declared for the year came to 319c, 32.1% less than the 484c declared the previous year.

Recovery

According to Engelbrecht, the first half of the financial year was negatively impacted by a combination of various - mainly once-off - factors. These included industrial action in the Centurion area which impacted stock availability.

"It took us the best part of six months to recover our position as our suppliers cannot just deliver on-demand," explained Engelbrecht.

In the second half of the financial year the group set clear targets and Engelbrecht is pleased with the sales growth, increased market share and increased basket size achieved since the beginning of January.

"Our South African operations are doing well, and we do not see that changing," he said.

The performance of the SA operations was, however, not enough to neutralise the negative impact of results of operations in the rest of Africa, mostly due to currency devaluations and certain aspects, like rentals, maize and fuel, being priced in dollar terms.

"We have been operating in the rest of Africa for 24 years now... We have invested in infrastructure, supply chains and agricultural programmes. So, I think the value of our investment in the rest of the continent is still very valid," said Engelbrecht.

"There is no need for us to run away from our investment in the rest of Africa, but that does not mean we must stay at all cost. We have exited from countries like Egypt and more recently Mauritius. We re-evaluate things all the time, but on a country-by-country basis. We have an absolute clamp down on costs and make sure we are not spending unnecessarily."

At the same time, to keep goods affordable for already constrained consumers, the group's selling price inflation for the financial year was at 1.2%, similar to the year before. At year-end, the number of products priced cheaper than the previous year was to 9 679.

Shoprite Group's share price closed 9.25% down at R126.86.

shoprite  |  checkers  |  retail  |  earnings reports
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