Low inflation puts a lid on Shoprite’s sales

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Low inflation puts a lid on Shoprite’s sales

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Published Date: 2018-10-30 | Source: Stephen Gunnion | Author: Stephen Gunnion

Low inflation puts a lid on Shoprite’s sales

The retailer says it doesn't foresee material increases in food inflation until next year, which should keep prices low this festive season.

Shoprite has reported muted first-quarter sales growth due to food deflation and poor product availability after a provider strike and a new warehousing system in Gauteng meant it couldn't get enough goods onto the shelves of its stores.

In an operational update, the supermarket group said turnover rose just 0.4% in the three months to end-September. That excludes the effects of hyperinflation on its Angola operations. SA sales grew by 1.7% during a period which saw continued low inflation, with close to 12-thousand items remaining cheaper than they were a year ago.

The retailer said the core-customer base of its Shoprite chain, in particular, remained under pressure due to rising transport costs and unemployment. Its Checkers chain continued to show better growth, although it was also affected by availability issues in the broader Gauteng region.

Its operations across the rest of Africa reported an 8.6% drop in turnover in rand terms, mainly due to the depreciation of Angola's currency, the kwanza, after year-end and more recently the depreciation of Zambia's kwacha. This was partly mitigated by its hedging strategy.

Shoprite's furniture division reported an 8.7% increase in sales, while the OK Franchise division recorded turnover growth of 6.3%.

Although some food price inflation is inevitable in the next few months due to current rand weakness and escalating transport costs, Shoprite said it didn't foresee material increases in internal food inflation until next year, which is good news for consumers ahead of the festive season. It said it remained positive about its operational strength and is making good progress on its strategic priorities particularly around private label development, franchise offer and its ability to capture a higher share of the more upmarket shoppers' grocery spend.

Its shares declined by 0.5% to R182 yesterday.





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