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Shoprite Holdings Limited (SRGHY)
OTHER OTC:SRGHY
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Shoprite Holdings
(OTC:SRGHY)
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Rating:74Outperform
Price Target:
$18.50
▲(10.78% Upside)
Action:ReiteratedDate:03/04/26
The score is driven primarily by solid underlying financial performance and a supportive earnings call featuring resilient sales/margins and strong cash generation. Offsetting factors include weaker free-cash-flow trends and elevated leverage, while technicals are mixed and valuation appears only moderately attractive.
Positive Factors
Scale & Market Reach
Extensive store network and very high customer traffic provide durable competitive advantages: buying scale, supplier leverage, and category breadth. High volumes support cost absorption, assortment depth and resilience to local shocks, sustaining long‑term gross margin and margin mix benefits.
Margin Sustainability
Maintained group and RSA margins despite low inflation indicate strong procurement, pricing and operational discipline. Clear medium‑term margin targets (trading margin ~5.7%–5.9%, gross margin ~23.9%–24.2%) suggest management confidence in sustaining margins through efficiencies and mix management.
Strong Cash Generation & Disciplined CapEx
Robust operating cash and tangible working‑capital gains show ability to fund expansion and returns internally. Management is tightening CapEx while continuing store roll‑out, balancing growth and capital discipline to support dividends, buybacks and potential deleveraging over the medium term.
Negative Factors
Elevated Leverage
High leverage reduces financial flexibility and increases sensitivity to interest or earnings shocks. With substantial lease liabilities and capex commitments, elevated debt can constrain opportunistic investments and complicate balance‑sheet management if cash conversion weakens or regional headwinds persist.
Weak Free‑Cash‑Flow Conversion
A severe drop in free cash flow growth undermines capacity to service debt, sustain dividends, or fund expansion from internally generated funds. Even with strong operating cash in H1, the structural decline in FCF conversion highlights execution or timing risks in converting earnings into durable liquidity.
Non‑RSA Market & Supply‑Chain Risks
Significant operational exposure to markets with FX shortages, import constraints and political/operational interruptions creates structural volatility in margins and inventory. Persistent non‑RSA headwinds can restrain group profitability and complicate cross‑border procurement and capital allocation decisions.
Shoprite Holdings (SRGHY) vs. SPDR S&P 500 ETF (SPY)
Market Cap
$9.17B
Dividend Yield2.25%
Average Volume (3M)77.00
Price to Earnings (P/E)21.5
Beta (1Y)0.78
Revenue Growth8.19%
EPS GrowthN/A
CountryUS
Employees140,000
SectorConsumer Cyclical
Sector Strength84
IndustryDepartment Stores
Share Statistics
EPS (TTM)N/A
Shares Outstanding591,339,000
10 Day Avg. Volume0
30 Day Avg. Volume77
Financial Highlights & Ratios
PEG Ratio1.61
Price to Book (P/B)5.20
Price to Sales (P/S)0.62
P/FCF Ratio52.58
Enterprise Value/Market Cap20.16
Enterprise Value/Revenue0.73
Enterprise Value/Gross Profit3.22
Enterprise Value/Ebitda8.62
Forecast
1Y Price TargetN/A
Price Target UpsideN/A
Rating ConsensusN/A
Number of Analyst Covering0
EPS Forecast (FY)N/A
Revenue Forecast (FY)N/A
Shoprite Holdings Business Overview & Revenue Model
Company DescriptionShoprite Holdings Limited, an investment holding company, primarily engages in the food retailing business in South Africa and internationally. The company operates through four segments: Supermarkets RSA, Supermarkets Non-RSA, Furniture, and Other Operating segments. It also offers clothing, general merchandise, cosmetic, and liquor products; furniture, home entertainment, and floor covering products; and liquors, electrical and household appliances, and soft furnishings. In addition, the company distributes various pharmaceutical products and surgical equipment to pharmacies, hospitals, clinics, dispensing doctors, and veterinary surgeons. As of July 04, 2021, it operated 2,913 stores under the Shoprite, Shoprite Hyper, Checkers, Checkers Hyper, Usave, Shoprite LiquorShop, Checkers LiquorShop, House & Home, OK Furniture & Power Express, MediRite Pharmacy, TransPharm, Computicket, Computicket Travel, Checkers Food Services, Freshmark, k'nect, OK Foods, OK Grocer, OK MiniMark, OK Express, Sentra, OK Liquor, and Megasave brands. Further, the company provides ticketing, and car rental and accommodation services; stadium management, capacity management, travel management, and access control solutions; and short-term insurance and treasury management services. Shoprite Holdings Limited was founded in 1979 and is based in Brackenfell, South Africa.
How the Company Makes MoneyShoprite Holdings generates revenue primarily through the sale of goods in its supermarkets and retail outlets. The company's revenue model is centered on high-volume sales and competitive pricing strategies, which attract a large customer base. Key revenue streams include grocery sales, non-food items, and private label products, which often yield higher margins. Shoprite also benefits from economies of scale, allowing it to negotiate better pricing with suppliers. Additionally, the company engages in promotional activities and loyalty programs to drive sales. Strategic partnerships with local suppliers and manufacturers enhance product offerings and support operational efficiency, contributing to its overall earnings.
Shoprite Holdings Earnings Call Summary
Earnings Call Date:Mar 03, 2026
(Q2-2026)
| Next Earnings Date:Sep 08, 2026
Earnings Call Sentiment Positive
The call presented a broadly positive operational and financial picture: robust sales growth (+7.2%), maintained group margins (trading margin 5.7%; RSA supermarkets 6.2%), improving returns (ROIC >19%) and strong cash generation (ZAR 13.3bn). Digital (Sixty60) and adjacent businesses showed high growth and strategic traction, and management is tightening CapEx while continuing an active store roll‑out. Key challenges include profitability pressure in non‑RSA markets (Mozambique/Angola), IFRS16‑driven finance/depreciation cost increases, low/deflationary price environment compressing monetary growth and elevated utilities costs. On balance the positive operational momentum, margin maintenance and cash strength outweigh the regional and accounting headwinds.Q2-2026 Updates
Positive Updates
Solid top-line growth
Group sales grew 7.2% year-on-year, adding about ZAR 9.2 billion to reach almost ZAR 137 billion for the half year; Supermarkets RSA sales grew 7.1% to ~ZAR 115 billion with like‑for‑like sales +2.7%.
Maintained margins and trading profit
Trading profit increased 5.9% to ZAR 7.7 billion with an overall H1 trading margin of 5.7%; RSA supermarkets delivered a 6.2% trading margin (described as world‑class) despite a low‑inflation/deflationary environment.
Gross profit and segment margins
Gross profit rose 7.1%; Supermarkets RSA gross margin reported at 25.3% (group gross margin ~23.8% for the six months) and management expects full‑year gross margin around 23.9%–24.2%.
Strong digital and adjacent business momentum (Sixty60 & Petshop)
Sixty60 turnover ~ZAR 11.9 billion, growing ~34.6% year‑on‑year; adjacent businesses grew 70.9% to ~ZAR 1 billion, with Petshop Science adding 45 of 53 new adjacent stores and making a meaningful contribution.
Store expansion and space growth
Opened 273 new stores in the last 12 months (262 in RSA supermarkets); space growth for the period 7.3% (driven by Checkers Hyper expansion); plan to open ~123 stores in H2.
Improved returns and shareholder returns
ROIC improved from ~17% to over 19%; returns exceeded WACC (WACC 12.3%, with ROIC/ROE materially above that); diluted headline EPS up ~7.9% and final dividend increased 7.7% to ZAR 3.07 per share.
Strong cash generation and disciplined CapEx
Cash generation from core operations ZAR 13.3 billion in H1; working capital improvements contributed ~ZAR 5.4 billion; H1 CapEx ZAR 3.9 billion (2.9% of revenue) and guidance for lower full‑year CapEx (~ZAR 7.5 billion) as management tightens spend.
Customer and volume growth
Customer visits and volumes increased: ~572 million customer visits (+>5%), serving 100+ million customers per month, sold ~4 billion items; social/affordability initiatives sold 9.5 million ZAR‑1 items and 55.6 million ZAR‑5 items.
Negative Updates
Non‑RSA profitability pressure (Mozambique, Angola)
Supermarkets non‑RSA margins and profitability came under pressure: sales growth in non‑RSA was strong (+12.1% to ~ZAR 11.5 billion) but margins were hit by business interruptions in Mozambique, foreign currency shortages limiting imports, and Angola headwinds.
Interest revenue decline and one‑off effects
Interest revenue decreased ~9.8% to ZAR 101 million, driven by maturity of ZAR 345 million Angolan bonds/bills (partial repatriation of USD 12.4 million); this reduced trading profit contribution in non‑RSA.
IFRS 16 / lease base driving higher finance and depreciation costs
Net finance cost increased 13.4%, driven by growth in the IFRS 16 lease base (lease liability growth ~15.5% and lease base ~17.2%); depreciation & amortisation rose 7.9% to ZAR 4.2 billion (IFRS16 portion +16.3% to ZAR 2.6 billion), pressuring reported finance/EBITDA metrics.
Low inflation / deflation compressing monetary sales value
Internal food inflation was low (H1 ~0.7%, December entered deflation with ~14,000 items cheaper year‑on‑year). Although volumes and customer numbers rose, monetary growth was constrained and promotional participation rose (~40% of basket), adding risk to future margin sustainability.
Rising utilities and operating cost pressures
Water and electricity costs increased 17.3%, moving the utility ratio to ~2.2% of sales (target ~2.0%); employee benefits grew 8.6% and some other operating lines (security +12.3%, advertising +6.6%) added cost pressure.
Disposals, restatements and transaction delays
Sale of furniture business to Pepkor (RSA assets) delayed by competition tribunal proceedings — RSA part unlikely to conclude in FY2026; prior‑year restatements for Ghana and Malawi discontinued operations created comparatives complexity. Non‑RSA furniture proceeds of ZAR 568 million received in Jan 2026.
Franchise and other operating segments subdued
Franchise growth muted at +1.7% with a net decrease of 9 stores; other operating segments decreased ~1.6%, partly reflecting the subdued inflation environment and operational headwinds in some sub‑segments.
Supply‑chain disruption risk
Management flagged global container / Suez Canal disruption risk and ongoing supply‑chain complexities; imports and brand owner service levels (confidential discounts/rebates) can materially affect gross profit and on‑shelf availability despite strong current service levels (>98% overall on‑shelf availability).
Company Guidance
Management guided to full‑year gross margin of about 23.9%–24.2% and a realistic trading‑margin outcome of 5.7%–5.9% (medium‑term target 6%), noted the Sixty60 delivery‑cost reclassification will slightly pressure gross margin early in the year, and reiterated an effective tax rate of ~27%–28%; operationally they plan to open ~123 stores in H2 (aiming to return space growth to ~5.5%–6% after H1’s 7.3%), expect full‑year CapEx of ~ZAR7.5bn (H1 ZAR3.9bn; ~82% expansion), aim to reduce depreciation/sales to ~3% (H1 3.1%), expect electricity/water around ~2.1%–2.2% of sales (H1 2.2%), see continued inventory and working‑capital improvement after H1 cash generated from operations of ZAR13.3bn and a ZAR5.4bn positive working‑capital move, and confirmed dividend policy unchanged (1.75x of full‑year diluted HEPS from continued operations) with the share‑buyback mandate still available.Shoprite Holdings Financial Statement Overview
Summary
Strong income statement momentum (revenue growth and healthy EBIT/EBITDA margins) and solid ROE, but balance-sheet leverage is elevated (debt-to-equity 1.85) and cash flow quality is weaker with a sharp free-cash-flow growth decline (-69.61%).Income Statement
Shoprite Holdings has demonstrated consistent revenue growth over the years, with a 4.98% increase in the latest period. The gross profit margin has remained stable, indicating efficient cost management. However, the net profit margin is relatively low at 3.00%, suggesting room for improvement in profitability. The EBIT and EBITDA margins are healthy, reflecting strong operational performance.85
Very Positive
Balance Sheet
The company's debt-to-equity ratio is relatively high at 1.85, indicating significant leverage, which could pose a risk if not managed carefully. However, the return on equity is strong at 25.12%, showcasing effective use of shareholder funds. The equity ratio suggests a balanced capital structure, but the high debt levels warrant caution.78
Positive
Cash Flow
Shoprite Holdings has experienced a significant decline in free cash flow growth, down by 69.61%, which is a concern. The operating cash flow to net income ratio is moderate, indicating decent cash generation relative to earnings. The free cash flow to net income ratio is lower than ideal, suggesting potential challenges in converting profits into free cash flow.70
Positive
| Breakdown | Jun 2025 | Jun 2024 | Jun 2023 | Jun 2022 | Jun 2021 |
|---|---|---|---|---|---|
Income Statement | |||||
| Total Revenue | 252.70B | 240.72B | 214.96B | 184.08B | 168.03B |
| Gross Profit | 61.44B | 54.81B | 51.71B | 45.06B | 41.21B |
| EBITDA | 24.66B | 21.80B | 19.68B | 17.25B | 15.78B |
| Net Income | 7.58B | 6.25B | 5.89B | 5.71B | 4.84B |
Balance Sheet | |||||
| Total Assets | 124.94B | 112.33B | 102.36B | 91.45B | 77.07B |
| Cash, Cash Equivalents and Short-Term Investments | 10.07B | 13.02B | 13.26B | 11.11B | 8.57B |
| Total Debt | 55.88B | 49.37B | 48.55B | 42.13B | 34.22B |
| Total Liabilities | 94.83B | 84.60B | 76.08B | 65.83B | 55.86B |
| Stockholders Equity | 30.19B | 27.79B | 26.13B | 25.48B | 21.08B |
Cash Flow | |||||
| Free Cash Flow | 2.98B | 6.11B | 3.12B | 4.78B | 4.76B |
| Operating Cash Flow | 10.98B | 13.84B | 9.83B | 9.91B | 7.98B |
| Investing Cash Flow | -7.37B | -6.78B | -6.23B | -4.06B | -653.00M |
| Financing Cash Flow | -4.30B | -7.75B | -2.85B | -7.24B | -9.74B |
Shoprite Holdings Technical Analysis
Positive
16.70
Price Trends
16.57
Positive
16.46
Positive
15.93
Positive
Market Momentum
0.06
Positive
47.21
Neutral
-0.11
Positive
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For SRGHY, the sentiment is Positive. The current price of 16.7 is above the 20-day moving average (MA) of 16.69, above the 50-day MA of 16.57, and above the 200-day MA of 15.93, indicating a neutral trend. The MACD of 0.06 indicates Positive momentum. The RSI at 47.21 is Neutral, neither overbought nor oversold. The STOCH value of -0.11 is Positive, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for SRGHY.
Shoprite Holdings Peers Comparison
UnderperformOutperform
Sector (61)
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
81 Outperform | $8.28B | 8.85 | 17.78% | 2.46% | -2.97% | -8.57% | |
76 Outperform | $10.47B | 12.56 | 25.10% | 2.45% | 0.29% | 3.65% | |
74 Outperform | $9.17B | 21.54 | 25.27% | 2.25% | 8.19% | ― | |
68 Neutral | $5.89B | 12.98 | 17.59% | ― | 11.09% | 51.51% | |
67 Neutral | $5.00B | 11.63 | 11.28% | 3.23% | -2.83% | 184.32% | |
61 Neutral | $18.38B | 12.79 | -2.54% | 3.03% | 1.52% | -15.83% | |
58 Neutral | $1.74B | 9.60 | 5.02% | 2.33% | -6.13% | -22.57% |
* Consumer Cyclical Sector Average
SRGHY
Shoprite Holdings
16.61
2.52
17.92%
GAP
Gap Inc
28.15
8.67
44.49%
KSS
Kohl's
15.48
4.57
41.86%
M
Macy's
18.81
6.07
47.62%
URBN
Urban Outfitters
65.69
8.92
15.71%
VIPS
Vipshop
16.79
1.38
8.96%
Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.