Black Friday, holiday sales spur demand at South Africa's Shoprite

Shoppers leave the Shoprite store in Daveyton
Shoppers leave the Shoprite store in Daveyton, South Africa May 23, 2018. REUTERS/Siphiwe Sibeko

JOHANNESBURG, Jan 31 (Reuters) - South Africa's biggest supermarket group Shoprite (SHPJ.J) reported a 16.8% jump in half year sales on Tuesday, supported by a record Black Friday and festive season as both cash-strapped shoppers and upmarket consumers went after deals.

Shoprite's duel discount and upmarket grocery model tends to shield it better than rivals against high inflationary pressures as it targets millions of South Africans reliant on government grants as well as affluent shoppers with much bigger budgets.

To attract shoppers amid aggressive price competition from rivals Pick n Pay (PIKJ.J) and upmarket Woolworths (WHLJ.J), it offered discounts of 7 billion rand ($402 million) at Shoprite and Checkers stores in addition to holiday deals, it said.

But the offerings would hurt margins of its South Africa supermarkets business, the company said.

"This together with the impact of the approximate 56% year-on-year increase in fuel price on our supply chain operations will result in...marginally lower gross margin for the period," Shoprite added.

The retailer, with over 2,100 stores across Africa, said group sales for the six months ended Jan. 1 jumped to 106.3 billion rand ($6.10 billion). Second quarter sales rose by 15.2%.

The group's core business, Supermarkets South Africa, which contributes up to 80% to the topline, grew sales by 17.5%, with like-for-like sales growth of 11.1%.

Internal selling price inflation for the period was much higher than a year ago, measuring 9.4%, reflecting the group's exposure to commodities such as wheat, where selling price inflation has been notably higher, it said.

Its rest of Africa business grew sales by 17.5% in rand terms.

($1 = 17.4260 rand)

Reporting by Nqobile Dludla Editing by Promit Mukherjee and Louise Heavens

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