Woolworths versus Shoprite

Shoprite and Woolworths released financial results this week, and there was a big difference in how investors received the news.

Shoprite’s share price jumped from R209 to over R220 on their results – and continued to rise – while Woolworths’ share price is down for the week.

The main reason for the difference in share price performance was growth over the reporting period.

Shoprite’s operational update for the 52 weeks to 3 July 2022 revealed a strong performance with 9.6% growth in sales to R184 billion.

Taking into account the additional week of sales included as part of the prior year’s 53-week reporting period, Shoprite increased 2022 sales by 11.9% on a 52-week basis.

Shoprite’s business growth is testimony to successfully adapting to changing consumer behaviour.

Their large allocation of capital expenditure toward store refurbishment (45%) and IT (22%), revealed in their interim results, contributed to these results.

Checkers is the fastest-growing grocer in the premium food market. The Checkers Sixty60 app is also South Africa’s top grocery app.

Shoprite has implemented an effective strategy to penetrate the up-market retail segment where Woolworths used to dominate.

It is now a direct competitor to Woolworths Food and, with the help of its excellent eCommerce play, is gaining market share in the high-end of the food market.

Woolworths, in comparison, could only increase sales by 1.4% for the 52-week period ended 26 June 2022.

The biggest detractor to Woolworths’ performance was the strict lockdowns in Australia in the first half of the financial period.

It forced Australian-based David Jones and Country Road Group to temporarily close stores which led to a 70% loss in sales at their brick-and-mortar stores.

The good news for Woolworths shareholders is that David Jones and Country Road recovered some of their losses from the -10.3% and -8,1% respective revenue growth reported in the interim results.

Woolworths, throughout all its business segments, had impressive online sales growth that aided in this recovery.

It was an encouraging sign given their increased allocation to technology in the capital expenditure.

The tables below give a breakdown of Woolworths and Shoprite’s latest results.

Shoprite versus Woolworths expansion strategies

Shoprite is Africa’s largest supermarket retailer with strong retail brands, including Checkers, Shoprite, House & Home, and OK.

The retailer’s growth strategy has always focussed on Africa and has successfully increased its non-South African revenue.

Although still a small portion of Shoprite’s total revenue, the company said it remains committed to having a presence on the African continent.

However, it has chosen to focus on markets where they are profitable, has invested significantly, and has scale.

As such, Shoprite has sold its Nigerian business to Persianas Group, meaning its non-RSA segment is now 10 African countries.

Shoprite’s share price showed strong growth over the last two years, and it is now trading close to its all-time high of 2018.

Woolworths, in comparison, decided to target the Australian market for growth in addition to its local operations.

Woolworths owns the South African retail chain Woolworths and Australian retailers David Jones and Country Road.

The South African Woolworths business consists of fashion, home, and beauty stores, many of which incorporate a premium food retail offering.

Stand-alone food stores and “Food Stops” attached to Engen petrol stations are also located in urban areas.

Woolworth’s strategy to create “a leading southern hemisphere retailer” by buying Australia’s David Jones for over R20 billion in 2014 did not work out as planned.

Significant write-downs of David Jones knocked the company’s profitability and share price.

Woolworths is still feeling the impact of this acquisition, and its share price is still only around half of what it was seven years ago.

Share price comparison

The chart below shows Shoprite and Woolworths’ share price performance over the last decade.