Mighty Checkers machine rolls on, Sixty60 sales up 150%

Checkers, which accounts for about R400 of every R1 000 in sales recorded by the group in South Africa, continues its astonishing momentum, with sales growth of 9.1% in the 52 weeks to 3 July.

This growth came despite having two large-format Checkers Hyper stores closed due to the unrest and looting last July.

Read: Shoprite steams ahead, with double-digit earnings and dividend growth

Shoprite Group CEO Pieter Engelbrecht says market disruptor “Checkers Sixty60 continued to innovate and grow its sales, despite reporting against an incredible growth trajectory established subsequent to its introduction two years ago”. Sales from the on-demand delivery service grew by 150% versus last year.

This has certainly helped ensure that Checkers sales growth was more than double that of Woolworths Food.

Checkers Sixty60 now offers 23 000 products at 300 locations and has created more than 6 000 jobs since its launch.

How Checkers Sixty60 dominates the on-demand grocery market
Numbers show Checkers, PnP eating Woolies Food’s lunch

Shoprite concluded a transaction during the year to acquire 50% of the on-demand delivery business operated by RTT, now called Pingo Delivery, allowing it to own “crucial last mile logistics to win in digital”. It also hints at potentially opening this up to (non-competing) third-party customers, with Engelbrecht saying that the new company provides it “with a platform to monetise our expertise in this area”.

The strong Checkers sales growth had a “margin mix benefit” – in other words, sales at Checkers are generally at far higher margins than in Shoprite and USave stores.

Private label products, which allow the retailer to capture a larger margin, are now nearly 19% of sales, from closer to 18% a year ago.

It says it has more than 30 brands in the country that now each do more than R100 million in sales. Nearly 1 300 new products were launched in the last year, with Checkers’s ‘Forage & Feast’ range leading its efforts in the “premiumisation of food”.

The trading margin in South Africa was 6.8% – inching closer and closer to the industry-leading levels of Woolies Food. Overall, the group’s trading margin shrunk slightly from 6.1% to 6%.

By contrast, the group’s Shoprite and USave unit, which make up 52.8% of the South African business increased sales by ‘just’ 7.2%. Interestingly, USave sales were up 11.4% which suggests that Shoprite’s mass-market customer base is under significant pressure, especially with sharply higher fuel/transport prices as well as inflation. The group says selling price inflation in July (outside of the reporting period) was 7.3%.

Read: SA’s largest grocers try to shield consumers from rising food prices

Overall, the Supermarkets RSA business grew sales by 10.1%, with 8.5% like-for-like growth – the “strongest in a decade”.

The main driver of this was a monster rebound in liquor sales.

These are up 44.5% due to both strong underlying growth, as well as liquor stores being closed for fewer days due to Covid-19 lockdowns in the fiscal than in the previous year.

It will open 275 stores across the group in the next year – more than double the 128 it opened in the last 12 months. These will include “smaller formats … closer to home”. Expect a ramp up in the number of Checkers Foods neighbourhood stores which will no doubt continue to chip away at (especially) the Spar and Pick n Pay franchise markets. The planned openings do not include the Masscash/Cambridge stores it intends to purchase from Massmart. Engelbrecht hopes competition approvals are received in the next six months.

The group set its sights on the premium supermarket rival a number of years ago and it says its store upgrades mean it now “leads” in “fresh food theatre” and are paying dividends.

Nearly two in every five of its Checkers stores (102 of 275) have been updated with a further 51-plus targeted in the next 12 months.

It has moved into the “adjacent pet and baby categories” both in physical retail formats as well as targeted online propositions. Its Petshop Science e-commerce store launched in July. This will ensure that it captures additional spend in categories it doesn’t necessarily compete in meaningfully. One can imagine it is giving serious consideration to entering additional categories.

The group reported 9.6% growth in group sales to R184.1 billion. However, if the impact of the additional (53rd) week last year is removed, the increase was 11.9%. Diluted headline earnings per share increased by 10% (to 1048.1c) with the full year dividend up by 10% to 600c.

Listen: Shoprite CEO Pieter Engelbrecht on results, a record dividend and creating nearly 4 000 jobs in the past year (read transcript)

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