Shoprite (SHP) - Capital Intensive Retailing
We evaluate the capital investments of SHP in recent years, and argue that its excellent 5.76% net margin comes at a hefty capital requirement. We show that the level of DC space approaches that of a much larger Tesco UK, and that our assessment of the financial case for the latest ZAR1.6bn DC in Cape Town, show that this DC may operate at a loss in its early years.
Shoprite Holdings Limited is an investment holding company. The Company is a food retailer and wholesaler. It operates in the Republic of South Africa (RSA). It operates through four segments: Supermarkets RSA, Supermarkets Non-RSA, Furniture and Other operating segments. The Supermarkets RSA segment includes retail operations under the Shoprite, Checkers, Checkers Hyper and Usave brands in South Africa, retailing products, such as food, clothing, general merchandise, cosmetics and liquor. The Supermarkets Non-RSA segment includes its retail operations under the Shoprite, Checkers, Checkers Hyper, Usave and certain Hungry Lion brands outside of South Africa. The Furniture segment includes its retail operations under the OK Furniture, OK Power Express and House & Home brands retailing products, such as furniture, household appliances and home entertainment systems. Other operating segments include trading in franchise operations, and retail and wholesale of pharmaceutical products.
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