Shoprite in aggressive store expansion

Competition has intensified in SA and the new playground for retailers‚ Africa‚ after US giant Walmart entered the country last year. Rivals have also tried to take advantage of struggling Pick n Pay‚ which has undertaken a transformation drive to arrest declining market share.

Shoprite plans to open 149 stores by June 2013‚ and had already confirmed 21 opportunities in Angola and nine in Nigeria‚ Basson said.

Earlier this year Shoprite raised R8bn from the market in a concurrent share and bond offering aimed at expanding its operations‚ a move analysts say will help it take on Walmart in Africa. Some of this will be used for a property fund in Nigeria to secure centres in that country‚ the company said.

Avior Research analyst Michael Mcleod said Shoprite had been investing in Africa for some time. "We will start to see the benefits from these investments soon."

A 'disappointing' update

Last month‚ Shoprite delivered what analysts called a disappointing trading update for the year ended June‚ with even a 14.3% increase in turnover deemed unsatisfactory. Basson refused to apologise for the company's performance saying that it had performed extremely well even though it fell below expectation.

Total turnover for the year grew 14.4% from R72.3bn to R82.7bn in the year ended June.

The turnover increase of 14.3% in its supermarkets in an environment in which internal food inflation averaged 4.9% represents real growth in excess of 9%‚ the company said.

Its South African supermarkets‚ which contributes 78.1% to group turnover and consists of the three chains Shoprite‚ Checkers and Usave‚ continued to trade successfully‚ the company said. Its local supermarkets increased turnover by 12.9% from R57.2bn to R64.6bn.

The group's supermarket operation outside of SA reported an increase in turnover of 25.4% at current exchange rates and by 19.7% at constant currencies. Shoprite said a lack of suitable sites remained a "major impediment" to growth in Africa.

The furniture division reported a sales increase of 11.1% to R3.4bn in an environment in which continuing price deflation averaged 5.1%. Growth in existing stores was 8.8% while trading profit was 33.5% higher than a year ago.

Mcleod said the company's comparable or existing store growth was good considering the tough environment.

The company said it expected trading conditions to remain largely the same for at least the first half of the new financial year. "Nothing on the horizon suggests the pressure on consumers' disposable income will ease off; if anything‚ it will increase further with a rise in global food prices at this stage seemingly unavoidable‚ the company said.