{"id":815228,"date":"2025-03-04T14:00:00","date_gmt":"2025-03-04T12:00:00","guid":{"rendered":"https:\/\/businesstech.co.za\/news\/?p=815228"},"modified":"2025-03-04T13:14:47","modified_gmt":"2025-03-04T11:14:47","slug":"dark-clouds-gather-over-shoprite-checkers","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/business\/815228\/dark-clouds-gather-over-shoprite-checkers\/","title":{"rendered":"Dark clouds gather over Shoprite Checkers"},"content":{"rendered":"\n

Shoprite\u2019s latest results revealed that the retailer is facing significant challenges, with its share price plummeting 6% before rebounding.<\/p>\n\n\n\n

On Tuesday, 4 March 2025, Shoprite released its unaudited results for the 26 weeks ending 29 December 2024.<\/p>\n\n\n\n

The Shoprite Group, which includes Shoprite, Checkers, and Usave, increased revenue by 9.4% to R130.8 billion.<\/p>\n\n\n\n

Merchandise sales increased by 9.6% to R128.6 billion, while sales from its South African supermarkets increased by 10.4% to R107.7 billion.<\/p>\n\n\n\n

Diluted headline earnings per share increased by 9.9% to 659.9 cents from the restated 600.3 cents in the prior period.<\/p>\n\n\n\n

The Shoprite Group opened a net total of 283 stores during the past year<\/strong><\/a> and increased its staff complement by 2,989 employees in six months.<\/p>\n\n\n\n

Shoprite returned R1.5 billion to shareholders through dividends, over and above the R997 million spent to buy back shares during the six months.<\/p>\n\n\n\n

Shoprite CEO Pieter Engelbrecht said the sales growth was the result of detailed data-led planning and execution.<\/p>\n\n\n\n

\u201cIn the context of selling price inflation of 1.9%, this quantum of additional spending, equating to a 10.4% increase in sales, was underpinned by strong volume growth,\u201d he said.<\/p>\n\n\n\n

He added that one of their strengths is that they are a multi-brand, platform business operating at scale.<\/p>\n\n\n\n

\u201cOur core supermarket operations, Checkers, Shoprite, and Usave, are corporate-owned and operated,\u201d he said.<\/p>\n\n\n\n

Engelbrecht said their technology team completed an installation of their new point-of-sale system rollout across 2,450 stores.<\/p>\n\n\n\n

The ShopriteX digital team, together with Checkers store operations and Pingo Delivery, delivered millions of orders over six months.<\/p>\n\n\n\n

The company also re-platformed its Checkers Sixty60 on-demand grocery delivery tech stack to upgrade functionality and incorporate same-day general merchandise delivery.<\/p>\n\n\n\n

\u201cWe expect the addition of more than 10,000 general merchandise products to our re-platformed Checkers Sixty60 app,\u201d Engelbrecht added.<\/p>\n\n\n\n

The Shoprite CEO said most of the company’s growth will continue to be achieved by its three distinct South African corporate-owned and managed supermarket businesses.<\/p>\n\n\n\n

\"\"<\/a>
Shoprite CEO Pieter Engelbrecht<\/figcaption><\/figure>\n\n\n\n

Shoprite Checkers’ slowing growth<\/strong><\/h2>\n\n\n\n

On the surface, Shoprite\u2019s latest results looked excellent. However, the share price plummeted by 6% after its release, revealing that it is not all good.<\/p>\n\n\n\n

Although the share price recovered from the sudden drop, the question remains as to why investors reacted so negatively to the results.<\/p>\n\n\n\n

One of the reasons is that the retailer\u2019s growth was significantly lower than many shareholders expected.<\/p>\n\n\n\n

When accounting for its discontinued furniture business operations, the group’s revenue increased by 9.4% from the previous period.<\/p>\n\n\n\n

However, without excluding the revenue from discontinued operations, Shoprite\u2019s absolute revenue increased by only 5.7%.<\/p>\n\n\n\n

Compared to the past 3 years’ results, the current interim period revenue growth is underwhelming.<\/p>\n\n\n\n

\"\"<\/a><\/figure>\n\n\n\n

Shoprite\u2019s lofty valuation<\/strong><\/h2>\n\n\n\n

When Shoprite\u2019s relative value is considered, the share price drop after the results were released should not surprise investors.<\/p>\n\n\n\n

Shoprite trades at significantly higher price multiples than its industry competitors, Spar and Pick n Pay.<\/p>\n\n\n\n

Shoprite trades at a price-to-sales (P\/S) multiple almost four times greater than Spar and Pick n Pay.<\/p>\n\n\n\n

It means an investor pays almost four times more per unit of Shoprite revenue than it does for either Spar or Pick n Pay.<\/p>\n\n\n\n

The reason for the valuation difference can largely be explained by the difference in profitability between these competitor companies.<\/p>\n\n\n\n

In its latest annual report, Shoprite generated a net profit margin of 2.60%, while Spar only reported a net profit margin of 0.23%. Pick n Pay reported a net loss margin of -2.84%.<\/p>\n\n\n\n

Another aspect that explains the difference in relative valuation between these companies is the difference in revenue growth rates.<\/p>\n\n\n\n

Since 2020, Shoprite has experienced much more substantial revenue growth than Spar or Pick n Pay.<\/p>\n\n\n\n

Therefore, Shoprite\u2019s share price is much higher in relation to its revenue, which translates into greater profitability and is, therefore, worth more.<\/p>\n\n\n\n

Furthermore, its revenue is valued higher due to the greater anticipated revenue growth rate. Simply put, investors believe Shoprite will outperform the rest.<\/p>\n\n\n\n

Shoprite\u2019s latest revenue result of only a 5.7% increase in absolute revenue represents an underperformance relative to its historical growth.<\/p>\n\n\n\n

Compared to Pick n Pay\u2019s interim result for the period ending August 2024, Shoprite did not achieve much better revenue growth.<\/p>\n\n\n\n

Measure<\/strong><\/td>Shoprite<\/strong><\/td>Spar<\/strong><\/td>Pick n Pay<\/strong><\/td><\/tr>
P\/S Ratio<\/td>0.62<\/td>0.17<\/td>0.15<\/td><\/tr><\/tbody><\/table><\/div><\/figure>\n\n\n\n
Measure<\/strong><\/td>Shoprite<\/strong><\/td>Spar<\/strong><\/td>Pick n Pay<\/strong><\/td><\/tr>
Average revenue growth since 2020<\/td>11.3%<\/td>6.6%<\/td>5.9%<\/td><\/tr><\/tbody><\/table><\/div><\/figure>\n\n\n\n
Measure<\/strong><\/td>Shoprite<\/strong><\/td>Pick n Pay<\/strong><\/td><\/tr>
Revenue Growth<\/td>5.7%<\/td>4.2%<\/td><\/tr><\/tbody><\/table><\/div><\/figure>\n","protected":false},"excerpt":{"rendered":"

Shoprite\u2019s latest results revealed that the retailer is facing significant challenges, with its share price plummeting 6% before rebounding.<\/p>\n","protected":false},"author":10,"featured_media":798453,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[9872],"tags":[5223,21554,7520],"class_list":["post-815228","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-business","tag-checkers","tag-pieter-engelbrecht","tag-shoprite"],"_links":{"self":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/815228","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/users\/10"}],"replies":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/comments?post=815228"}],"version-history":[{"count":2,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/815228\/revisions"}],"predecessor-version":[{"id":815234,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/815228\/revisions\/815234"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media\/798453"}],"wp:attachment":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media?parent=815228"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/categories?post=815228"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/tags?post=815228"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}