Recasts throughout
By Nqobile Dludla
JOHANNESBURG, Sept 3 (Reuters) - Supermarket group Shoprite SHPJ.J plans to have a total of 1,000 Usave discount stores over the five years, stepping up a turf war for South Africa's low-income shoppers, it said on Tuesday as it reported a 7.2% rise in annual headline earnings.
Facing fierce competition from rivals Pick n Pay PIKJ.J and Woolworths WHLJ.J, the country's biggest supermarket group is pushing hard to expand its footprint into previously unserviced -urban areas through its Usave brand and also in affluent areas through its upmarket Checkers business.
Shoprite's Usave, which has limited assortment at lower prices, has 463 stores.
"Certainly I believe that there's room for at least a 1,000 of these stores in South Africa over the five years," Shoprite Group CEO Pieter Engelbrecht told investors.
He added that his store expansion strategy is to expand into areas where the retailer is underrepresented, including in townships, where Usave has been recently expanding.
"The tougher it gets out there, the less disposable income out there, the more relevant Usave becomes."
Pick n Pay wants to add 200 discount grocery Boxer stores by 2026. It currently has 477 stores, while SPAR Group SPPJ.J has plans to enter the discount grocery space.
According to data cited by Pick n Pay from Institute of Grocery Distribution, discounter penetration of the grocery market is only 7% in South Africa, well below many other countries, providing an opportunity for retailers to grow in this space.
Shoprite, with 3,638 stores in South Africa and African countries, is also trying to appeal to the affluent income customers, announcing that it was in advanced discussions to purchase the remaining 50% stake in its last-mile logistics provider Pingo.
Pingo supports its upmarket grocery delivery business Checkers Sixty60, which has benefited from increased online demand since the pandemic. In the 52 weeks to June 30, it grew sales by 58.1%.
Engelbrecht said that the retailer wants to own the end to end customer experience.
Earlier, Shoprite reported headline earnings per share from continuing operations of 12.50 rand, with group sales rising by 12% to 240.7 billion rand, boosted by both its upmarket and discount grocery brands.
(Reporting by Nqobile Dludla
Editing by David Goodman and David Evans)
((.dludla@thomsonreuters.com; +27103461066;))