S AFRICA: Shoprite lowers prices and boosts profits
Shoprite, the South African retailer, has today (2 September) booked a jump in annual sales and earnings as the cut-price supermarket operator benefited from consumer concern over the credit crunch.
The company recorded a 43.7% leap in trading profit to ZAR2.3bn (US$295.6m) for the year to the end of June, on the back of 22.3% rise in turnover to ZAR38.95bn.
Last autumn, Shoprite said it had decided to cut its margins on basic foodstuffs as consumers felt the effect of the global economic downturn.
CEO Whitey Basson said the decision had helped drive a rise in customer numbers at the company's stores. "The cut in margins led to a substantial shift in consumer support for Shoprite and reflected in the increase of 11.2% in the number of customer transactions in South Africa," Basson said.
The company said that costs increases were kept below the rate of sales growth, which lead to the sharp rise in trading profit.
Basson said that Shoprite also saw growth from its higher-end Checkers chain in South Africa, which saw sales climb 15.6%.
The Shoprite boss also pointed to the company's expansion outside South Africa for its growth. "Today we operate 100 supermarkets beyond our borders which in the past year reflected strong sales growth," Basson said.
However, Basson added that he did not expect the growth rate of the last year to be sustainable. "While food inflation continued to rise throughout the review period we expect it to reach its peak towards the end of the year. By 24 August we already saw a deflation of 4.9% for the month in our fruit and vegetable business.
Basson added: "Global food shortages will, however, remain a reality as competition for available stocks increases. I am nevertheless convinced that the group will continue to perform well because of the inherent strength of the business."
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