Shoprite Holdings Limited

Shoprite Holdings Ltd

Type	Public
Traded as	JSE:SHP
Industry	Retail
Founded	1979
Headquarters	Brackenfell, Western Cape , South Africa
Revenue	R184.08 billion (2022)
Operating income	R10.81 billion (2022)
Net income	R5.74 billion (2022)
Total assets	R62.7 billion (2022)
Total equity	R25.6 billion (2022)
Number of employees	152 000 (2023)
Website	https://www.shopriteholdings.co.za

Summary

Business Description

Shoprite Holdings Limited, an investment holding company, primarily engages in the food retailing business in South Africa and internationally. The company operates through four segments: Supermarkets RSA, Supermarkets Non-RSA, Furniture, and Other Operating segments. It also offers clothing, general merchandise, cosmetic, and liquor products; furniture, home entertainment, and floor covering products; and liquors, electrical and household appliances, and soft furnishings. In addition, the company distributes various pharmaceutical products and surgical equipment to pharmacies, hospitals, clinics, dispensing doctors, and veterinary surgeons. As of July 04, 2021, it operated 2,913 stores under the Shoprite, Shoprite Hyper, Checkers, Checkers Hyper, Usave, Shoprite LiquorShop, Checkers LiquorShop, House & Home, OK Furniture & Power Express, MediRite Pharmacy, TransPharm, Computicket, Computicket Travel, Checkers Food Services, Freshmark, k'nect, OK Foods, OK Grocer, OK MiniMark, OK Express, Sentra, OK Liquor, and Megasave brands. Further, the company provides ticketing, and car rental and accommodation services; stadium management, capacity management, travel management, and access control solutions; and short-term insurance and treasury management services. Shoprite Holdings Limited was founded in 1979 and is based in Brackenfell, South Africa.

Shoprite Holdings Limited is listed on the Johannesburg Stock Exchange (JSE), the Namibian Stock Exchange (NSX) and the Lusaka Securities Exchange (LUSE). Additionally, Shoprite Holdings recently announced that it will be listed on a secondary South African stock exchange (the A2X) from Tuesday 11 April 2023. Its primary listing (that will be the basis of this investment report) is on the JSE where it carries the ticker symbol “SHP”. Shoprite is listed on the JSE under the “Food Retailers and Wholesalers” sector and the “Consumer Staples” industry. As of 26 July 2023, the current stock price of Shoprite is ZAR 252.36 and the market capitalization is around ZAR 138.44 billion . Shoprite is part of the JSE Top 40 Index and is identified as a liquid stock that has a high trading volume.

Industry Overview and Competitive Positioning Shoprite belongs to the retail industry, specifically in the food retailer and wholesalers sector. This industry, which is highly competitive and dynamic, is driven by changing consumer preferences and technological advancements. Shoprite has addressed the industry dynamic of ever changing consumer preferences by continuously launching new products to retain existing clientele and attract new customers (particularly higher-income customers). In 2022, they launched 1 285 new products and five new store formats with the intention of growing their market share in the premium food retailer sector. In terms of technological advancements, Shoprite is at the forefront and the industry leader. This is evident when looking at the success of their digital commerce platform, called Checkers Sixty60. This was South Africa’s first on-demand grocery delivery service and has achieved a 75% share of the grocery delivery market.

The “Porter's Five Forces” framework is used below to analyse the competitive intensity and attractiveness of the retail industry in which Shoprite operates in.

1. Threat of new entrants: The retail industry has a low to moderate threat of new entrants. Barriers to entry include high capital requirements, economies of scale, and established distribution networks. However, online retailers such as “Takealot” as well as pharmacies such as “Dis-Chem” have increased their food product offerings and are disrupting traditional food retailers.

2. Bargaining power of suppliers: The bargaining power of suppliers in the retail industry is moderate to high. Retailers depend on suppliers for product availability and quality. However, retailers may be able to negotiate lower prices by consolidating their purchasing power or by developing their own private-label brands. Shoprite being the market share leader inherently has considerable purchasing power as well as its own private-label brands.