Release Date: September 03, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Shoprite Holdings Ltd (SRGHY, Financial) achieved a 12% revenue growth, significantly outperforming the market.
- The company opened 292 new stores and created 6,490 new jobs, demonstrating strong expansion and employment growth.
- Gross profit increased by 11.7% to ZAR58 billion, maintaining a competitive gross profit margin.
- The Xtra Savings program provided ZAR17 billion in instant savings to customers, enhancing customer loyalty and satisfaction.
- Sixty60, the on-demand grocery delivery service, saw a 58% increase in sales and created over 11,500 new job opportunities.
Negative Points
- High interest rates and currency devaluations in key markets like Zambia and Angola negatively impacted financial performance.
- The company faced a 17.5% increase in net finance costs, primarily due to elevated interest rates.
- Load shedding and infrastructure issues in South Africa continue to pose operational challenges.
- The furniture segment showed muted sales growth, leading to the decision to sell assets in this category.
- Employee benefits and other operating expenses increased by 13% and 10.2% respectively, impacting overall profitability.
Q & A Highlights
Q: How do you think about gross margin going forward with inflation and your price investment strategies?
A: Maintaining gross profit margin while gaining market share is crucial. We balance promotional items in the basket to ensure we can maintain those margins. Investments in pricing tools and AI help buyers make informed decisions, enhancing transparency and decision-making.
Q: What benefits will the Discovery Vitality partnership bring to Checkers?
A: This partnership was driven by customer demand. It involves minimal costs, mainly marketing and printing. Customers can select us as a physical and digital partner, enhancing their shopping experience. The primary benefit is delivering what our customers want.
Q: How do you manage store expansion and avoid cannibalization?
A: We focus on areas where we are underrepresented. More new Checkers stores are being opened compared to Shoprite stores, reflecting our growth strategy. We see significant growth opportunities in these areas.
Q: How do you take the point of sale system conversion live without disrupting sales?
A: We implement these changes at night to avoid disrupting sales during store hours.
Q: What is the rationale behind the furniture transaction with Pepkor?
A: We lack scale in furniture and believe Pepkor is a better fit for this segment. This allows us to focus our capital investments where we see better returns, such as in food retail.
Q: What is the target market for Usave, and how do you view the informal market?
A: We do not target the informal market, which serves its community well. Usave focuses on providing affordable essentials to consumers, especially in areas with limited disposable income. We aim to open 1,000 Usave stores in the next five years.
Q: How do you plan to roll out Medirite Plus and UNIQ stores?
A: The rollout will be measured and strategic. We are still learning which geographical areas yield the best returns. Medirite Plus will leverage our existing pharmacy licenses and customer base, focusing on locations near our supermarkets.
Q: How do you view the competitive landscape?
A: Our focus is on delivering value to customers rather than reacting to competitors. We ensure our pricing policy is relevant and consistent with customer needs, driving our strategy.
Q: How do you manage the impact of currency devaluations in non-RSA operations?
A: We saw significant devaluations in Zambia and Angola, impacting our rand conversion of sales. We manage this through hedging and repatriating funds to mitigate risks.
Q: What are your plans for capital expenditure in the coming year?
A: We plan to invest around ZAR8 billion in new stores, refurbishments, and maintenance. This includes expanding our distribution capabilities and implementing new technologies to enhance customer experience.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
