Africa’s largest supermarket chain is holding onto lower prices in an attempt to win market share.
Shoprite’s first-half gross margin edged lower, reflecting “low selling-price inflation, moving to deflation,” the Cape Town-based retailer said Tuesday. Trading profit at its core South African supermarkets unit rose 7.1% to R7.2 billion.
The push to grow customer numbers and volumes through price cuts comes as Walmart renews efforts to crack the South African market with stores under its own brand.
Shoprite opened 209 outlets in its local supermarkets division and added 53 in new chains including Petshop Science, Uniq Clothing, Checkers Outdoor and Little Me.
“If we have to mark our own homework, what stands out is more customers, higher volumes and continued market share gains, meaning you’re running faster than your competitor,” Chief Executive Officer Pieter Engelbrecht said in a presentation to investors.
The shares fell 3.4% by 3:08 p.m. in Johannesburg compared with a 4.1% decline at SPAR, 4.6% drop at Pick n Pay and 5.3% tumble at Woolworths.
Shoprite’s margin slipped to 23.8%, with selling price inflation averaging 0.7% for the half-year. South Africa’s food and non-alcoholic beverages cost growth for the period was 4.7%.
Low single-digit selling-price inflation is expected to persist in the second half, Shoprite said.
Source: https://dailyinvestor.com/retail/122746/shoprite-going-in-for-the-kill/