Shoprite Holdings Limited (JSE: SHP) has encountered a challenging start to the year, with its share price closing the previous week over 2.2% lower, marking a fifth consecutive week of losses. Despite this recent decline, the stock has seen a year-to-date depreciation of over 12%, contrasting with a positive growth of over 7% over the past 52 weeks.
Fundamentally, Shoprite has showcased a resilient performance, particularly in its core South African supermarket segment. The company reported a robust 14.6% sales increase during the 26 weeks ended 31 December 2023, translating to an additional R12.4 billion in customer spend. This growth can be attributed to strategic expansions, including the acquisition of 51 stores from Massmart Holdings Ltd and the successful launch of 197 new stores. Moreover, Shoprite’s innovative approach to customer engagement, notably through the Checkers Sixty60 app, has driven a 63.1% sales increase, reflecting its adaptability in a challenging operational environment.
On the strategic front, Shoprite has joined forces with global retail giants to establish W23 Global, a venture capital fund aimed at accelerating innovation within the grocery sector. With an investment target of approximately $125 million (R2.3 billion) over the next five years, W23 Global seeks to address industry challenges through technology-driven solutions and sustainable practices.
Technical Analysis
The daily chart shows that Shoprite’s share price is currently trading flat, attempting to counter three consecutive sessions of declines. The price action trades below the downward-sloping 50-SMA (blue line), 100-SMA (orange line), and 200-SMA (red line), indicating a bearish trend. The recent cross of the 50-SMA below the 100-SMA further reinforces the bearish sentiment.
The downward-sloping RSI (31.77) sits well below the 50.00 level, with the indicator likely to enter oversold territory in the coming sessions. While this could signal a potential short-term bounce, a sustained push lower could see the initial support level of 23,030 cents breached. A break below this level could expose the major support zone at 21,821 cents.
Conversely, a recovery attempt would face resistance at the 25,434 cents level. Overcoming this hurdle with significant volume could indicate a shift in momentum and potentially lead to a test of the 26,663 cents and 27,829 cents resistance levels in the coming sessions.
Summary
While the company’s fundamentals boast strong sales growth and strategic expansion, the recent share price decline and weak technical indicators suggest ongoing investor concerns. If the price breaks below the initial support level of 23,030 cents, a further decline towards the major support level of 21,821 cents becomes likely. However, a break above the resistance level of 25,434 cents could signal a potential reversal and open the door for a move towards 26,663 cents and 27,829 cents in the short term.
Sources: TradingView, iol.co.za, Reuters.
Piece written by Mfanafuthi Mhlongo, Trive Financial Market Analyst
Disclaimer: Trive South Africa (Pty) Ltd (hereinafter referred to as “Trive SA”), with registration number 2005/011130/07, is an authorised Financial Services Provider in terms of the Financial Advisory and Intermediary Services Act, 37 of 2002. Trive SA is authorised and regulated by the South African Financial Sector Conduct Authority (FSCA) and holds FSP number 27231. Trive Financial Services Ltd (hereinafter referred to as “Trive MU”) holds an Investment Dealer (Full-Service Dealer, excluding Underwriting) Licence with licence number GB21026295 pursuant to section 29 of the Securities Act 2005, Rule 4 of the Securities Rules 2007, and the Financial Services Rules 2008. Trive MU is authorized and regulated by the Mauritius Financial Services Commission (FSC) and holds Global Business Licence number GB21026295 under Section 72(6) of the Financial Services Act. Trive SA and Trive MU are collectively known and referred to as “Trive Africa”.
Market and economic conditions are subject to sudden change which may have a material impact on the outcome of financial instruments and may not be suitable for all investors. Trive Africa and its employees assume no liability for any loss or damage (direct, indirect, consequential, or inconsequential) that may be suffered. Please consider the risks involved before you trade or invest. All trades on the Trive Africa platform are subject to the legal terms and conditions to which you agree to be bound. Brand Logos are owned by the respective companies and not by Trive Africa. The use of a company’s brand logo does not represent an endorsement of Trive Africa by the company, nor an endorsement of the company by Trive Africa, nor does it necessarily imply any contractual relationship. Images are for illustrative purposes only and past performance is not necessarily an indication of future performance. No services are offered to stateless persons, persons under the age of 18 years, persons and/or residents of sanctioned countries or any other jurisdiction where the distribution of leveraged instruments is prohibited, and citizens of any state or country where it may be against the law of that country to trade with a South African and/or Mauritius based company and/or where the services are not made available by Trive Africa to hold an account with us. In any case, above all, it is your responsibility to avoid contravening any legislation in the country from where you are at the time.
CFDs and other margin products are complex instruments and come with a high risk of losing money rapidly due to leverage. You should consider whether you understand how these products work and whether you can afford to take the high risk of losing your money. Professional clients can lose more than they deposit. See our full Risk Disclosure and Terms of Business for further details. Some or all of the services and products are not offered to citizens or residents of certain jurisdictions where international sanctions or local regulatory requirements restrict or prohibit them.
