South African retail group Shoprite on Tuesday reported a 55.1% increase in diluted headline earnings per share to 128.4c for the six months ended December 2007, from 82.8c in the same period in 2006.
An interim dividend of 49c per share was declared, which was up 40% from 35c in 2007.
Its diluted earnings per share grew 47.7% to 127.8c, from 86.5c.
Operating profit climbed 34.7% to R1.02 billion, from R758.6 million last year. Profit for the period was up 47.7% to R683.29 million, while sales of merchandise gained 21.7% to R23.26 billion.
"Total turnover increased … due mainly to the excellent performance from all the divisions, with the exception of the furniture business. The growth was in excess of the increase expected after the impairment of trading operations due to industrial action in the corresponding period," it said.
"The growth achieved exceeded the anticipated recovery following the industrial action in the latter half of 2006," said Shoprite chief executive Whitey Basson, adding that it was also not restricted to the businesses whose activities were impaired by the strike, but occurred in all divisions with the exception of the furniture business.
He said that the rate of growth exceeded most of the rest of the local food-retailing sector, and the group increased market share for the period under review. The group also managed to increase the trading margin from 3,8% to 4,4% due to a strong growth in turnover, coupled with strong cost control.
The group said that during the period under review a number of factors had contributed to the erosion of consumer confidence, such as the Reserve Bank's repeated raising of interest rates, a marked increase in fuel prices and sharply higher inflation that combined to reduce consumers' disposable income.
"In addition, the National Credit Act, introduced in the middle of 2007, put a curb on credit availability and increasingly affected sales of durable goods in particular," it added.
It said that food retailing is cushioned to an extent against the effects of an economic downswing, and any recessionary impact is felt much later in the food sector than elsewhere in retail.
"We managed to contain our internal food inflation to 7,99%, compared to a national food inflation which accelerated to an average of 12,1% compared to 8,5% in the corresponding period," it said.
Looking at the group's supermarket operation in South Africa, encompassing three chains - Shoprite, Checkers and Usave - forms the core of the business and grew sales by 22.1% to R18.449 billion.
All three major chains contributed to the overall 1.3% market share increase to 28.8%, and the group now operates 523 stores countrywide, having opened 17 during the reporting period.
Shoprite, with 301 local stores, increased turnover by 27.3% to R11.049 billion, and Shoprite's market share gain was the highest in the group.
During the review period, Checkers continued upgrading stores. It reported a strong growth in Checkers, which was "hardly, if at all" affected by the industrial action of 2006.
Its turnover grew 13.4% to R6.912 billion in its 139 stores.
Usave's main focus is on growing its number of outlets, now standing at 83. During the review period it boosted sales by 44.1%.
In line with the rest of the food industry, the OK Franchise Division did well, increasing turnover by 17.7%. However, the cumulative impact on consumers of higher interest rates, fuel prices and food costs, was nowhere felt more strongly than in the market for durable and semi-durable goods.
"In contrast to the food sector, the market for durable goods such as home appliances and entertainment products still experienced virtually no inflation, forcing traders to continue chasing unit sales, discounting heavily in a highly competitive environment, to boost or even just maintain turnover figures," it said.
Its furniture division grew sales by 3.2%, but at the expense of margins, resulting in a drop of 19.0% in trading profit.
Supermarkets outside South Africa represented approximately 12% of sales and trading profit.
"The decision to concentrate on the oil-rich western coast of Africa seems to be correct. The established countries also produced good results," it said.
"During the review period the group finally opened its first supermarket in Ghana, delayed by a fire in the previous financial year. Located in a modern retail mall in Accra, it is exceeding expectations. In neighbouring Nigeria, the group has bought land in Lagos for a second supermarket and is securing further sites. In addition, the group acquired two sites in the Democratic Republic of Congo for development," it concluded.
Article via I-Net-Bridge
