Checkers’ successful Sixty60 grocery delivery app is hurting Woolworths Food as it targets the same group with a highly effective eCommerce service.
This is the view of Chantal Marx, head of investment research and content at FNB Wealth and Investments.
Speaking to Power Business, Marx said Shoprite has more than Checkers and its eCommerce service Sixty60 going for it.
However, it is a growing part of Checkers’ business and has repositioned the brand from a convenience perspective.
In its latest annual financial results, Shoprite said Checkers Sixty60 maintained its growth trajectory, expanding the store base from which it services Checkers customers to 300 stores.
Sixty60 recorded a 150% increase in annual sales and remained the top South African grocery app with 2.4 million downloads.
A chunk of Checkers Sixty60’s growth came at the expense of Woolworths Food. It competes in the high-end market, and Woolworths Food’s Woolies Dash is still far behind Checkers Sixty60.
“You only have to look at how Woolworths Food has performed over the last year or two to see what the Sixty60 convenience offering has done,” Marx said.
The app has helped Checkers to experience exponential market share gains of more affluent customers, evidenced by market-leading sales growth of 9.1%.
“The Checkers brand’s value positioning and store upgrade strategy continued to deliver superior growth relative to peers,” Shoprite said.
“It is supported by the sustained and growing contribution from our world-class, on-demand, one-hour grocery delivery app, Checkers Sixty60.”
Through Sixty60, Checkers has gained a competitive advantage in an area of the market where Shoprite as a group used to be weak because of Woolworths Food’s success.
Commenting on Shoprite’s share price prospects, Marx said the company has never been a super-cheap stock.
The reason for its trading premium is that it is an exceptionally well-run business with cash flow certainty.
“Shoprite has invested heavily in its distribution and store footprint. It is a strong business which is growing nicely and generating cashflows,” she said.
Another attractive Shoprite characteristic is that it is a defensive stock which continues to perform well despite local or international economic headwinds.
“People are buying food despite increasing inflation. In fact, inflation is positive for Shoprite,” she said.
On a forward price-to-earnings (P/E) ratio of twenty times, it is not the cheapest stock on the JSE.
However, given the uncertainty in global markets with recession fears, Shoprite is a company in which you can feel safe.