Our opinion on the current state of SHOPRIT(SHP)Shoprite (SHP) is the largest grocery retailer and consumer goods company in Africa. The company has faced intense price competition, which has prevented supermarkets from fully passing on price increases to consumers. The share price experienced a significant decline from a high of R275 in March 2018 to levels around R100 in July 2020. However, it has since recovered strongly and is expected to benefit directly from any improvement in the South African economy.
Chairman Christo Wiese's major stake in Shoprite has been reduced to just over 10% of the ordinary shares, but he still holds 265 million deferred shares, effectively giving him 42% control of the company. Shoprite has exited several African markets, including Uganda, Madagascar, Nigeria, and Kenya. The company agreed to purchase 56 Cambridge and Rhino food stores from Massmart, which could strengthen its market position.
As the South African and African economies recover, particularly post-COVID-19, Shoprite is well-positioned to benefit from increased consumer spending. In a report on the unrest and looting, the company stated that out of the 1,189 supermarkets trading under the Shoprite, Usave, Checkers, and Checkers Hyper banners, 119 stores were severely impacted by looting and/or fire damage.
In its results for the 52 weeks ending 30th June 2024, Shoprite reported merchandise sales up 12% and headline earnings per share (HEPS) up 7.2%. The company generated R23.6 billion in cash from operations during the year and directed R7.8 billion towards its "Smarter Shoprite" strategy, which includes investments in new stores, store upgrades, digital and e-commerce, information technology, sustainability, and supply chain improvements.
Technically, the share price broke above its 200-day moving average on 2nd September 2020, when it was trading at 11,696c. Since then, the share has appreciated to 29,500c, representing a gain of 152% over four years. The company is expected to continue benefiting from the end of loadshedding and the potential formation of a government of national unity (GNU) in South Africa.