The shares of Shoprite Holdings LTD (JSE: SHP), Africa’s largest supermarket retailer, were struggling on Wednesday despite the recently released voluntary operational update for the quarter ended September 2023, which revealed a compelling first-quarter performance. The company reported a robust 13.2% growth in consolidated sales, driven by the core Supermarkets Republic of South Africa (RSA) segment. This growth was supported by the opening of 81 new stores, aligning with Shoprite’s ambitious plan to open 314 stores in the 2024 financial year.
Shoprite’s impressive sales growth of 13.3%, with internal selling price inflation at 8.3%, is noteworthy, especially considering challenges like the R281 million diesel bill incurred during the quarter to mitigate the impact of load shedding. The diesel cost, which surged by R90 million compared to the same period last year, underscores the company’s commitment to sustaining its core business operations despite external challenges. The company’s customer-focused approach has also allowed it to achieve substantial sales growth, exceeding market trends even when compared to the elevated sales growth in the prior year influenced by social unrest.
Despite challenges such as increased diesel expenses due to electricity load-shedding, Shoprite remains resilient, prioritizing store expansion and showcasing market dominance.
Technical Analysis
Examining the 1-day chart, Shoprite’s stock, currently trading slightly lower at R252.51, shows resilience above the 23.60% Fibonacci retracement level. Price action trading well above the downward-sloping 50-SMA (green line), upward-sloping 100-SMA (blue line) and flat 200-SMA (red line). The 100-SMA’s recent upward crossover with the 50-SMA suggests positive momentum. The rising RSI at 58.23 also acts to support the short-term uptrend.
Therefore, short-term trading opportunities could exist towards the resistance level at R258.81 should the 23.60% Fibonacci retracement level hold. A break above the initial resistance would likely bring the R266.84 resistance levels into play.
However, should the 23.60% Fibonacci retracement level fail to hold, short-term trading opportunities towards the R238.31 could arise. A break below the initial support would likely bring the R229.31 and R220.56 support levels within the bears’ reach in the short term.
Summary:
Shoprite’s voluntary operational update underscores the company’s resilience and strategic growth plans. The 13.2% sales growth in Q1, driven by the core Supermarkets RSA segment, reiterates Shoprite’s market leadership.
The technical analysis indicates potential short-term opportunities, emphasizing key resistance levels at R258.81 and R266.84. Investors should closely monitor the 23.60% Fibonacci retracement level for potential trend reversals, with a break below the level likely to leave the R238.31 support level within the bears’ reach.
Sources: TradingView, Trading Economics, Shoprite Holdings Ltd, Dow Jones Newswire, Reuters, MT Newswire.
Piece written by Mfanafuthi Mhlongo, Trive Financial Market Analyst
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