Weekly Stocktake with Danyaal
10 March 2023
|Index / Fund / Rate||Start of Year||Last week||This Week||% change YTD|
|JSE ALSI||73 049||78 293||76 454||4.66%|
|NASDAQ Composite||10 467||11 689||11 139||6.42%|
|S&P 500||3 840||4 046||3 862||0.57%|
|Prime Lending Rate||10,50%||10.75%||10,75%||2.38%|
|Lunar BCI WW Flexible Fund||141,43||154.68||153.41||8.47%|
|Brent Crude ($’barrel)||85,95||85.93||82.68||-3.80%|
Shoprite has multiple businesses under its portfolio, including Shoprite (which targets the lower-income market), Usave (which sells a limited range of products to the lowest-income market), and Checkers (which originally focused on the medium-income market but has now expanded into the upper-income market). Together, these brands serviced 33.8% of the SA market during H1 of Shoprite’s financial year, representing a markets share gain of 1.4% compared to the same period last year.
Shoprite’s philosophy is to aggressively pursue market share, which means they end up competing with multiple businesses that target different groups. In the current financial year, Shoprite plans to spend R6.3 billion on capital expenditure. They aim to open 425 new stores, including refurbing 94 stores recently acquired from Massmart. Shoprite’s Checkers Sixty60 platform is a good example of the company’s aggressive approach. The platform saw an 87% growth in sales compared to the same period last year, following a 250% increase in the prior year. The Sixty60 platform (which launched at the end of 2019) currently operates in 394 locations across South Africa, further expanding the company’s reach and market share.
Shoprite is not short of competition. Their competitors include Pick ‘n Pay, Spar, Massmart, and Woolworths. As retail customers are typically price sensitive, food retailers compete heavily with each other on price. However, during periods of high inflation, these businesses can be put under pressure as they seek to gain market share by trying to offer inflation-beating prices to customers while also maintaining healthy margins for their investors.
Shoprite’s H1 interim results, released last week, showed a 17% increase in revenue to R106 billion for the period. Load shedding forced Shoprite to spend R560 million on diesel during the period, impacting their trading profit. Their trading profit was only up 9% to R6 billion. Gross profit was R25 billion, representing a gross margin of 22%. The net profit margin for the period was 2.9%, a marginal decrease of 0.1 percentage points. Nonetheless, Shoprite was still able to increase its overall market share in the tough environment.
Shoprite is held in the Lunar BCI Worldwide Flexible Fund
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