Shoprite interim earnings up by 43.3%

An interim dividend of 70 cents per share was declared, up 42.9% from 49 cents a year ago.

Total turnover increased by 27.3% to R29.6 billion, while the group's trading profit was up 38.2% at R1,409 billion.

Chief Executive Whitey Basson said that despite difficult trading conditions brought about by the global economic slowdown, all the divisions of Shoprite Holdings posted first-rate results for the six months to end December 2008, comfortably exceeding food inflation levels.

"This was achieved notwithstanding the sacrifice of approximately R170 million to support consumers trying to cope with higher food inflation," he said.

Locally the low-price positioning of all three of its supermarket chains continued to attract growing numbers of increasingly price-sensitive consumers across the income spectrum. To assist struggling shoppers, savings brought about by falling fuel prices were rapidly passed on to consumers, he said.

Continued support led to an increase of 1.6% in local market share to 30.4% on a like-for-like basis.

"The Group's non-RSA supermarket operations again produced pleasing results growing turnover by more than 54% in rand terms on the back of a weaker local currency. By further sacrificing gross margin to build turnover on the one hand and managing the cost base efficiently on the other, a trading margin of 4.8% was achieved in the business as a whole," he said.

Shoprite's supermarket operation in South Africa, encompassing the Shoprite, Usave and Checkers brands, forms the core of the business and represented 77.6% of total turnover. In the six months the division grew ahead of the market by increasing sales by 24.5% to R22,963 billion.

This should be seen against the background of internal food inflation that escalated to 16.9% from 9.2% in the corresponding six months, the company said.

Non-RSA supermarkets performed satisfactorily and continued to grow despite intense difficulties and long lead times. At the end of the review period it comprised 101 supermarkets trading in 16 countries outside South Africa, predominantly under the Shoprite and Usave banners.

Supported by a weaker rand, this business increased total turnover by 54.3% in rand terms and by 50.3% on a like-for-like basis. Lower export prices from South Africa provided the group with a major price advantage in certain product categories.

The non-RSA supermarkets represented 14.1% of the Group's supermarket sales for the period under review.

Looking ahead, Shoprite said despite sales continuing to grow in January at the same rate as in the reporting period, the board does not expect this to be maintained for the remaining five months of the financial year.

As a result of the global financial meltdown and a slowdown in world trade, reduced exports will lead to job losses which will impact negatively on business.

Although retail markets in Africa to date have given little evidence of being troubled by these developments it is bound to happen as the crisis deepens worldwide, it said.

"As a board we therefore don't believe the present growth rate is sustainable although we do believe that because of its value positioning the Group is better placed than most to weather the storm and to achieve satisfactory results for the remainder of the financial year," it said.

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