“Wonderful” Shoprite: Engelbrecht uses deflation to crush competitors

Key topics:Shoprite grows sales 7.2% despite near-zero inflation.Checkers Sixty60 e-commerce surges 34.6%, outpacing rivals.262 new stores in a year, expanding omnipresence and market share..Sign up for your early morning brew of the BizNews Insider to keep you up to speed with the content that matters. The newsletter will land in your inbox at 5:30am weekdays. Register here.Support South Africa’s bastion of independent journalism, offering balanced insights on investments, business, and the political economy, by joining BizNews Premium. Register here.If you prefer WhatsApp for updates, sign up to the BizNews channel here..By Alec Hogg.If you ever doubted that retailing is a game of scale and execution, look no further than the operational update released by Shoprite Holdings on SENS this morning.In a South African economy that is gasping for air, Pieter Engelbrecht and his team in Brackenfell have just delivered another masterclass in defying gravity. The numbers for the six months to December 2025 tell a story not just of growth, but of a dominant player squeezing its advantage to suffocate the competition.The headline number—a 7.2% increase in sales from continuing operations to R136.8 billion—might look merely "solid" to the uninitiated. But as always, the devil is in the details. And the detail here is terrifying for Shoprite’s rivals.The Deflation WeaponThe most startling metric in this update is inflation. Or rather, the lack of it..Read more:.Shoprite grows 8% in Q1 as price inflation drops to near zero.While Stats SA reports food inflation at 4.7%, Shoprite’s internal selling price inflation for the period was a microscopic 0.7%. Even more telling, the group moved into deflation during the critical November and December trading months.Read that again. While the rest of the market was hiking prices to protect margins, Shoprite was effectively cutting them.This is a strategic masterstroke. By keeping prices low, Shoprite isn't just buying loyalty; it's driving volume. In the retail game, when inflation drops, your top-line revenue usually suffers unless you sell significantly more widgets. Shoprite grew sales by 7.1% in its core RSA supermarkets despite virtually zero inflation. That implies massive volume growth—customers are leaving other stores and filling their trolleys at Shoprite, Checkers, and Usave.NielsenIQ data confirms this: the group’s growth was 2.3 times that of the rest of the market. They aren't just winning; they are eating everyone else’s lunch.The Digital MoatThen there is the Checkers Sixty60 juggernaut. With a 34.6% surge in sales, it continues to defy the "post-COVID-19 slowdown" narrative that has plagued other e-commerce players globally.Compare this to the competition. Woolworths, in its update released last week, reported that its Woolies Dash service grew by 23%. Impressive, but still lagging the market leader. Pick n Pay’s asap! has shown signs of life under the new management, but Sixty60 remains the undisputed king of the hill—a data-rich moat that deepens with every delivery.Context: The Competitor LandscapeTo fully appreciate this update, you have to look at the neighbours.Pick'n Pay is currently in the throes of Sean Summers’ aggressive turnaround strategy. Recent updates show it is stabilising—closing the bleeding stores and focusing on basics—but it is still in the triage phase. While Summers is fixing a leaking boat, Engelbrecht is launching new battleships.Spar remains the laggard, bogged down by its own complexities and the hangover of its European adventures. Its growth has been anaemic (barely touching 1.6% in its last full year), and it is losing the war for the weekly trolley shop.Woolworths is the only one putting up a real fight, particularly in the premium food segment. Its recent update showed Food sales growing 7.0%—matching Shoprite’s pace. But Woolies is fighting a war on two fronts, with its fashion business often dragging the chain, whereas Shoprite is a focused food-fighting machine.The Bottom LineThe market update guides that Headline Earnings Per Share (HEPS) will rise between 5.2% and 10.2%. Some punters might have hoped for more, but given the deflationary environment, this is high-quality earnings growth driven by selling more products, not just by hiking prices.The group opened a net 262 stores in twelve months. That is a new store opening every 33 hours. It added 45 Petshop Science stores and continued rolling out its Uniq clothing format. Shoprite is omnipresent.For the investor, the Shoprite story remains the most compelling, if expensive, play on the JSE. The share price is never cheap, but quality rarely is. As the late, great Charlie Munger used to say, it's better to buy a wonderful company at a fair price than a fair company at a wonderful price. With these numbers, Shoprite proves once again that it is, without a doubt, a wonderful company.

“Wonderful” Shoprite: Engelbrecht uses deflation to crush competitors

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