Checkers coming after Woolworths in a big way

Trade Intelligence’s bi-annual Corporate Retail Comparative Report (CRCR) shows that Checkers is now outperforming Woolworths Food in South Africa, with its average turnover per store more than double.

This marks a significant lightning rod in the retail space as competition for high-income shoppers intensifies, the group said.

The CRCR report covers six major brands in South Africa’s retail space, with the first of two reports looking at the first half of the 2024 financial year.

During its first half, Woolworth Food saw turnover of R22.4 billion at its 369 stores (~R61 million per store).

Over its interim period, Checkers reported turnover of R38.5 billion across its 268 stores (~R144 million per store) – 2.4 times higher.

According to Trade Intelligence, factoring in all other financial checks and balances, Checkers’ average is actually 2.6 times higher than Woolworths Food.

The group said this can be directly attributed to the fight over premium or wealthier customers.

Checkers has made a concerted effort over the years to push deeper into the premium retail market—a space dominated by Woolworths.

Its first step in this direction came when it launched the upper-market Checkers FreshX store brand in April 2016.

Since then, the premium FreshX store count has grown to 115, with plans to increase this further.

Checkers next made another significant step toward directly competing with Woolworths’ high-LSM products in 2021 when it launched the Feast and Forage brand.

Woolworths is not sitting idle in the battle, however. The group has stepped up its game in the online and same-day delivery space, with its services taking on Checkers’ Sixty60 delivery channel.

As with other retailers, Woolworths has also sought to expand its services and value proposition, with a focus on pet care, food services and tech.

Retailers sitting on a secret

The CRCR report assesses six major retail brands in South Africa: Shoprite Holdings, The SPAR Group, Pick n Pay Stores, Woolworths Holdings, Clicks Group, and Dis-Chem Pharmacies.

Across all groups, combined turnover totalled R330 billion in the first half of 2024 – growth of 9.4%.

Trade Intelligence noted that while turnover growth for these companies seems promising, volume growth has been flat.

This means that retailers have mostly been benefitting from much higher prices due to inflation, with the only real growth coming from new stores and niche expansion. Consumers remain under severe pressure.

Shoprite, Boxer, and Clicks stood out as the retailers which showed real growth in this period, though this was relatively small growth.

The retail research company said that this relatively flat market is not only putting profit under pressure but also driving store footprint expansion and channel diversification to find pockets of growth and win market share from competitors.

Carey Leighton, an economist at Trade Intelligence said that “turnover growth for the six corporate retailers is being driven by price inflation and new stores – meaning underlying volume is flat.”

“HY/FY2024 has been tough – even Shoprite Supermarkets RSA saw a slump in underlying volumes as inflation eroded volume sales,” said Trade Intelligence.

“But beneath the surface, there are some interesting dynamics at play,” added Leighton.

Profit under pressure, but store footprint expands

Gross profit across the six retailers totalled R71 billion for HY2024, up +8.6% (for continuing operations).

However, gross margins have reached a four-year low, averaging 21.4% across corporate retailers.

Lower margin categories were seen in:

• Basic food
• Dispensary (especially generic medicines)
• Wholesale/distribution
• Promotions
• Markdowns/clearance
• Online sales (particularly niche products)
• Vaccines

High margin categories were seen in:

• Liquor
• Convenience food
• Clothing/fashion
• Cosmetics
• Private brands
• Building materials (DIY)

In response, Trade Intelligence said that investments in IT, supply chain efficiencies, and private brand expansions are becoming critical strategies for improving these margins.

With that said, 378 net new stores were added in HY2024; with a larger focus on higher-margin, smaller formats like forecourts and pharmacies.

“This focus on store footprint expansion is in pursuit of pockets of growth and in a bid to win market share from competitors,” said Trade Intelligence.

Read: The South African grocery store that is cheaper than Pick n Pay, Checkers, and Spar