Shoprite delivers double digit profit growth

Shoprite, one of South Africa's retail giants, has delivered outstanding financial results despite facing economic challenges in the region. The company reported a 25 per cent jump in headline earnings per share from continuing operations and operating profit climbed 15 per cent to over 5 billion rands. Pieter Engelbrecht, CEO of Shoprite Group, joined CNBC Africa to discuss the company's success and future prospects. Engelbrecht credited the company's sustained success to a combination of factors, including market share gains, innovation, and a focus on meeting customer needs. He highlighted the importance of in-store experience and unique product offerings in driving the company's growth, emphasizing that Shoprite competes across all market segments by understanding and delivering what customers value. One key area of focus for Shoprite has been its strategy in the high-end market segment. Engelbrecht talked about the brand's efforts to compete with established players like Woolworths by introducing new products, partnering with international suppliers, and enhancing the overall shopping experience. The company's commitment to innovation is evident in the introduction of 625 new products in the high-end market segment in the last six months. Despite the positive financial results, Engelbrecht expressed concerns about the economic challenges facing consumers in South Africa. He noted that while some segments of the market may have surplus money due to reduced travel expenses during the pandemic, high unemployment, low economic growth, and rising inflation pose significant challenges. He highlighted the impact of fuel price increases on household budgets and emphasized the need for government stimulus to boost the economy. When questioned about Shoprite's expansion plans in Africa, Engelbrecht acknowledged the company's focus on strengthening its presence in South Africa before considering re-entry into other African markets. He mentioned a gradual approach to expanding into new territories and emphasized the importance of innovation and digital transformation in the company's growth strategy. In terms of financial management, Engelbrecht addressed accusations of companies hoarding cash and having 'lazy balance sheets.' He explained that Shoprite generates significant free cash flow, which is used for capital investments, dividends, tax payments, and digital initiatives. The company's capital allocation program includes share buybacks and maintaining a balance between investment and return to shareholders. Overall, Shoprite's performance reflects its resilience in the face of economic uncertainties and its commitment to meeting customer needs through innovation and strategic growth initiatives.