Shoprite earnings up 18.6% to 280.8c

Earnings per share rose to 280.3 cents from 234.4 cents previously.

Due to transitional rules relating to the phasing out of STC (secondary tax on companies) and its replacement with the new Dividends Tax, Shoprite said it had decided to defer an interim dividend until after 1 April.

Trading profit was up 16.7% to R2.164 billion and operating profit was 19.8% higher at R2.188 billion.

Total turnover grew 13.2% from R36.259 billion to R41.054 billion for the period under review.

The company said the period under review was one of on-going slow growth of an economy still recovering from the fall-out of a worldwide recession, as well as unemployment, which had reached 25% in SA.

"The group was to an extent protected against this competition by the size of its store footprint and the efficiency of its infrastructure, which enabled it to be highly price competitive without sacrificing profitability," CE Whitey Basson said.

Shoprite said its trading margin at 5.3% was higher than in the corresponding period (5.1%) and reflected the increasing efficiencies achieved by, inter alia, the recent expansion of the group's supply chain infrastructure.

Internal inflation was 4.6% compared to the official inflation figure of 5.8%. "This compares with growth of 9.4% in the corresponding six months when internal deflation averaged 1.2%," it said.

A net 59 owned stores were opened in the period under review while particular attention was paid to maximising the benefits at operational level of the group's increased supply-chain capacity.

The group's core business, Supermarkets RSA, grew sales 12.3% from R28.515 billion to R32.031 billion and produced a trading profit of R1.788 billion from R1.530 billion.

Its flagship Shoprite chain, with 339 supermarkets in SA, increased sales 11.0% off an already high base.

Checkers, including Checkers Hyper, continued to grow its customer base by 4.6% during the review period, and increased turnover by 11% and 9.9% on a like-for-like basis.

Usave which now operates 204 stores in SA, having gained a net 14 outlets in the period under review, increased sales by 20.9% due to a 10.2% growth in the number of customer transactions and a 9.8% growth in basket size.

Shoprite's non-RSA supermarkets achieved a sales growth of 21.2%, and on a like-for-like basis of 13.9%, due partly to the weakness of the rand against most non-RSA currencies

The group's furniture division saw sales growth of 13.6% despite continuing difficult trading conditions brought about by the further erosion of consumer disposable income.

The turnover growth was generated mainly by the division's OK Furniture and OK Power Express chains which focus on the middle market.

"The operations of the OK Franchise Division were boosted by the consolidation of the acquired Metcash franchise stores which added 148 stores to its membership base spread throughout the rural areas of SA and Namibia," Shoprite noted.

"It grew total turnover by 16.7% and by 8.1% on a like-for-like basis and increased profitability as well," it added.

The retailer's pharmacy division consists of MediRite, which at the end of December operated 130 in-store pharmacies in Shoprite and Checkers outlets, as well as Transpharm, a wholesale supplier of pharmaceutical products to both MediRite and external customers.

MediRite, which experienced a surge of 25% in the number of prescriptions filled, maintains an on-going focus on the recruitment of qualified pharmacists to support its expansion.

Computicket, increased its customer count by 7% and opened its first cross-border outlet in Namibia during the period.

Looking ahead, Shoprite said it did not expect any material changes to take place in market conditions in the second half of the year as nothing in the economic environment suggested that the pressure on consumers will ease.

"The group nevertheless expects to maintain satisfactory growth in turnover and profitability as the benefits of an expanded infrastructure become more apparent," it added.