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Shoprite, South Africa’s second-largest retailer by sales, reported double-digit sales growth yesterday, confirming that food mass-market retailers were the only consumer sector to escape the downturn relatively unscathed.
January 17, 2008

By Tom Robbins

Cape Town – Shoprite, South Africa’s second-largest retailer by sales, reported double-digit sales growth yesterday, confirming that food mass-market retailers were the only consumer sector to escape the downturn relatively unscathed.

Sales last month at stores open longer than a year were 11.7 percent higher compared with the previous festive season, despite higher fuel costs that hit its core customers.

Half-year sales to December were up by 16.5 percent, but the company warned that a strike in the previous period at its biggest chain, Shoprite, gave an artificially positive view of the sales trend over this longer period. Sales including new stores were up 21.8 percent to R23.3 billion.

Rival Massmart reported last week that sales at its Masscash food wholesale division were also relatively good, up 15.4 percent over a similar period.

Statistics SA said yesterday that November sales at speciality food stores, which included delis and bakeries, were flat compared with a year ago, suggesting that higher market segment consumers were buying down.

Quinton Ivan, a portfolio manager at Coronation Fund Managers, said Shoprite had a “very strong” performance last month, considering the tough retail climate.

Ivan agreed that the December comparative figure was the most accurate reflection of sales performance, as the strike had ended before December in the previous period.

He noted that the strike had hit the company’s biggest chain, the Shoprite supermarkets.

Shoprite did not reveal food inflation, following steep rises in food commodities, but Ivan said he expected inflation had been in the high single digits for the half-year.

But Abri du Plessis, chief investment officer at Gryphon Asset Management, said it was hard to know to what extent the slower sales growth from December was due to the strike or to a slowdown in consumer spending.

He said unusual pre-Christmas clothing sales at both Woolworths and the Edgars chains suggested festive season sales had been relatively poor, despite the fact that consumers had probably spent beyond their means.

Shoprite shares fell 4.4 percent yesterday at R37.40, tracking the sector’s 4 percent loss.