Africa’s largest grocery retailer, Shoprite Group, expects merchandise sales to total R215 billion which is 16.9% higher than reported in the previous year, as alcohol sales continue to support growth.

On Tuesday, the JSE-listed retailer guided investors on its expected financial performance for the 52 weeks ended 2 July 2023.

The group’s core business – which accounts for over 80% of sales – also contributed to higher sales, with the segment achieving sales growth of 17.8%, while Checkers and Checkers Hyper stores saw an 18% growth in sales.

Market reaction

Shoprite saw slight share price gains during early morning trade on Tuesday, registering a 1.61% increase in value. The stock gained 16% in price value in the last 12 months, trading at a high of R246.77.

Headwinds

Despite reporting positive sales growth across its businesses, the retailer cautioned investors against the impact of the various headwinds experienced during the period.

Shoprite highlighted its fight against higher food prices and load shedding as the key drivers of operational costs during this period.

The group noted that its quest to deliver lower prices to customers in an elevated food inflation environment, with internal selling price inflation for the year averaging at 10.1%, may lead to lower gross margins compared to the prior year.

“As such, the group’s full-year gross margin will be lower than that reported last year (restated 2022: 24.5%); however, the decline is expected to be less than the gross margin decline reported in our 2023 interim results,” Shoprite said.

The R1.3 billion the retailer spent on diesel to power generators during blackouts also weighed on its performance.

“It is important to note that this cost became significant at higher stages of load shedding from September 2022,” the group said.

Another expense the retailer highlighted, although less material, related to distributions paid to group employees from the Shoprite Employee Trust and the onboarding of 4 480 employees related to new stores acquired from Massmart.