SA’s big retailers trying to help consumers by keeping prices down

South Africa’s major JSE-listed food retailers are continuing to play a part in trying to shield already compromised consumers from spiking food prices by keeping internal food inflation levels low.

Shoprite Group, Pick n Pay and Woolworths, in trading updates released on Tuesday, reported maintaining internal selling price movements below the recorded consumer price index (CPI) food inflation rate, which came in at 8.6% for June.

For Pick n Pay, internal selling price inflation for the 18-week period ended 3 July was maintained at 5% in its South African operations.

Competitor Woolworths says it managed to keep its food prices movement steady at 3.5% and its underlying product inflation at 3.9% for the 52 weeks ended 26 June.

Africa’s largest food retailer Shoprite reported maintaining internal selling price inflation for the 52-week period ended 3 July at 3.9%, despite seeing an acceleration in the fourth quarter that saw inflation in the second half of the period nearing 5%.

But this may not last long

The consumer in South Africa has, in the last few months, had to battle increasing price pressures fuelled largely by Russia’s ongoing invasion of Ukraine, which sparked a global rise in fuel prices and supply chain disruptions.

Sasfin equity analyst Alec Abraham warns that should the inflationary environment continue on its current trajectory, the country’s grocers may lose the ability to shield the consumer from future price shocks.

“The longer these elevated prices go on, the more difficult it becomes for both the retailer and the producer.
At some point, if the high inflation goes on for a prolonged period, you are going to start to see more of the price increases being pushed to customers.”

In the meantime, Abraham says that to feel the retailer’s pricing protection, consumers are going to have to start paying greater attention to their baskets by making cheaper, more affordable choices.

As he says, retailers are offering much of the price value in bulk products – which give customers greater value per kilogram – and in-house brands, which retailers often buy at a cheaper negotiated cost from producers.

“You’ve got to be an astute shopper to identify the value that they [retailers] are providing. It won’t be entirely obvious, for customers who just go in and buy what they always buy, to see that retailers are cutting them some slack,” he adds.

Shoprite performance

In its operational update for the 2022 full-year period, Shoprite says it has seen a 9.6% rise in total sales to about R184.1 billion.

The pleasing performance was, it says, partly boosted by the 44.5% surge in alcohol sales as well as the 10.1% increase in sales in its SA supermarket operations.

Coming off the home improvement rush seen by most retailers during the 2020/2021 periods, the group’s furniture business is seeing a downturn with sales for the current period slumping by 1.4%.

Shoprite’s other operating segments – including the OK Franchise, Transpharm, MediRite Pharmacies, Computicket and Checkers Food Services – saw an 8.5% uptick in sales.

The group also managed to increase its footprint by 127 stores, bringing its total store count – excluding those closed as a result of the July unrest – to 2 476.

Woolworths performance

Upmarket food, beauty, homeware and clothing retailer Woolworths, in its trading update for the full-year ended June 2022, reported a 1.4% increase in group turnover and concession sales.

The improved performance for the year was aided by the improvement in trading conditions in the second half, which saw group turnover growing by 4.9%

“This was despite the volatile global backdrop, supply chain disruptions exacerbated by the Russian invasion of Ukraine, the impact of rising inflation and interest rates, and severe load-shedding in South Africa,” the group says.

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The group’s Fashion Beauty Home (FBH) business also saw an improvement this time around, with full-year sales growing by 5.4% – boosted by “new winter ranges, market share gains in ‘must win’ categories, and a stronger performance from the rest of Africa”.

The food business registered a 4.2% rise for the year. The group noted that this segment’s performance reflected a return to out-of-home consumption by the consumer and low product inflation across key categories.

Pick n Pay performance

Releasing its quarterly update, Pick n Pay reported a 10.7% growth in sales for the 18 weeks ended July 2, 2022.

According to the group, the period saw a 97.3% surge in total online sales – which cover sales facilitated through scheduled delivery, click and collect and its on-demand app Asap!

Earlier this year, the group announced a partnership with Takealot’s delivery app Mr Delivery which will see customers accessing the retailer’s products with greater ease.

The project will be piloted in a few stores in August and is set to go national by the end of 2023.

In the face of rising inflation and interest rates, looking forward to the rest of the year Pick n Pay says it remains committed to shielding its consumers from increasing cost pressures.

“The Group’s objective is to maintain price investment at a particularly challenging time for consumers.”

“We anticipate CPI Food to accelerate further (June CPI Food was 8.6%) and will continue to invest in price in order to support consumers,” the group adds.

This article originally appeared on Moneyweb and was republished with permission.
Read the original article here.

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