Shoprite-aholics

Shoprite-aholics

Companies striving for growth in a sluggish economy face formidable challenges when trying to grow, particularly those operating as supermarket retailers with an already large presence in the country. Another way for expansion involves gaining market share from competitors, a strategy used by Shoprite, South Africa’s largest supermarket retailer. Shoprite’s strength comes from the some of the following attributes:

  1.  They boast an established portfolio of brands, each uniquely tailored to appeal to distinct customer segments. The Usave, Shoprite, and Checkers brands cater to specific markets based on customer income levels and range of products sold.
  2. Shoprite employs a centralized distribution model, leveraging large distribution centers around the country. This strategic approach enables them to maintain high stock levels in their stores while simultaneously managing costs. Their stores will also hold products with similar levels of quality.
  3. Shoprite distinguishes itself by predominantly owning and controlling its stores, in contrast to competitors like Pick ‘n Pay and Spar, which have a higher reliance on franchise outlets. This ownership structure allows Shoprite to swiftly implement business changes and ensures a superior level of consistency compared to its competitors.
  4. Shoprite also employs AI to do its purchasing from its suppliers. Shoprite had a 98% in-stock levels for the period. Shoprite are able to maintain a high in-stock levels, while still keeping their prices low, partially because of this.

Last week, Shoprite released their H1 2024 results. Revenue for the business increased by 13.9% to reach R121.1bn for the period. Excluding the revenue growth attributable to the acquisition of Massmart stores, Shoprite’s supermarket segment grew by 11.2%. While Gross Profit increased by 14.7% to R28.6bn, representing a 23.6% gross margin. Trading profit for the period increased by 10.7% to R6.7bn.

One of the standout metrics was Checkers Sixty60. Its revenue has grown by more than 60%. The app is leading more customers to the Checkers brand, resulting in market share growth. Checkers also use their stores as mini distribution centers, which means they don’t have to build and create new distribution centers for the Sixty60 purpose. Pieter Englebrecht, the CEO, has said these are the reasons this segment in profitable.

The supermarket retail arena is fiercely competitive, with customers primarily prioritizing price and product availability. Supermarkets operate within a framework of relatively low gross and net margins, making them highly susceptible to shifts in costs. Their path to profitability predominantly hinges on scaling their business to achieve higher sales volumes while concurrently maintaining consistent operating costs.

Shoprite is held in the Lunar BCI Worldwide Flexible Fund.

Key Indicators
Index / Fund / Rate
Start of Year
Last Week
This Week
% Change YTD
Index / Fund / Rate
Start of Year
188.33
Last Week
205.68
This Week
206.27
% Change YTD
9.53% Lunar Capital increasesymbol
Index / Fund / Rate
JSE ALSI
Start of Year
76 893
Last Week
72 775
This Week
73 718 Lunar Capital increasesymbol
% Change YTD
-4.13% Lunar Capital stocktake arrow down
Index / Fund / Rate
NASDAQ Composite
Start of Year
15 011
Last Week
16 274
This Week
16 085 Lunar Capital stocktake arrow down
% Change YTD
7.15% Lunar Capital increasesymbol
Index / Fund / Rate
S&P 500
Start of Year
4 770
Last Week
5 137
This Week
5 124 Lunar Capital stocktake arrow down
% Change YTD
7.42% Lunar Capital increasesymbol
Index / Fund / Rate
Prime Lending Rate
Start of Year
11.75%
Last Week
11.75%
This Week
11.75%
% Change YTD
0.00%
Index / Fund / Rate
USD/ZAR
Start of Year
18.30
Last Week
19.09
This Week
18.70 Lunar Capital stocktake arrow down
% Change YTD
2.19% Lunar Capital increasesymbol
Index / Fund / Rate
EUR/ZAR
Start of Year
20.17
Last Week
20.68
This Week
20.45 Lunar Capital stocktake arrow down
% Change YTD
1.39% Lunar Capital increasesymbol
Index / Fund / Rate
Brent Crude ($'barrel)
Start of Year
76.97
Last Week
83.33
This Week
81.82 Lunar Capital stocktake arrow down
% Change YTD
6.30% Lunar Capital increasesymbol
Source: Iress

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Our email address is: [email protected]

Disclosures
Lunar Capital (Pty) Ltd is a registered Financial Services Provider. FSP (46567)
Read our full Disclosure statement: https://lunarcapital.co.za/disclosures/
Our Privacy Notice: https://lunarcapital.co.za/privacy-policy/
The Lunar BCI Worldwide Flexible Fund Fact Sheet  can be read here.
This stocktake is prepared for the clients of Lunar Capital (Pty) Ltd. This stocktake does not constitute financial advice and is generated for information purposes only.

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