Shoprite pockets rise in sales

(Fin24) - Pan-African food retailer Shoprite said sales for December 2007 rose by 16.1% when compared with 2006, which analysts have billed as "pleasing".

The 16.1% increase accounted for both inflation and volume
growth; for the same month, same-store sales grew by 11.7%.

Shoprite says that for the six months to end-December, sales rose by 21.8% to R23.3bn, but notes that the increase should be seen against the three-month strike which took place from August to October 2006, as earnings in thatperiod were affected.

It says like-for-like business in the six-month period
grew by 16.5%.

Nedcor Securities retail analyst Syd Vianello says that
while the numbers were good, the market may be a little disappointed and may have expected more growth given increased social grants, higher food inflation and the perception that Shoprite is taking market share away from Pick n Pay.

Room to fall further

Coronation Fund Managers' food retail analyst Quinton Ivan
says high food inflation - especially in staple foods, which comprise a large part of the Shoprite basket - was beneficial for food retailers' numbers because, despite higher prices, sales volumes do not drop as food is a basic commodity.

Ivan says that while Shoprite is on a heavier rating
(trading on an earnings multiple of 19.3) when compared with Spar (17.6) and Pick n Pay (19.2), its earnings have grown at a faster rate.

Ivan's preference in the food-retail space remains Spar.

Ivan was particularly impressed with the 32.5% growth (20.2% on a like-for-like bases) in Shoprite's African operations. As at end-June 2007 (the most recent figures available), Shoprite had 120 stores in 16 African countries.

Negative overall market sentiment, which saw the all-share index down 3.4% by 13:00 - overshadowed the positive trading update, with Shoprite shares falling 5.4% to 3 700c.

Shoprite's fall was in line with that of fellow food
retailers Pick n Pay (down ) and Spar Group (down 3.6% to 5 300c).

Nedcor Securities retail analyst Syd Vianello says that food retail stocks have, until now, held up well due to them being defensive plays.

Vianello says that while the sell-off presented a buying opportunity, there was room for food retailers to fall further relative to apparel retailers, which have been trading at low price levels.
 

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