Benzinga contrasts two market leaders in an important industrial sector with the aim of letting readers decide which company is the better investment.
In this article we present an intercontinental battle between two powerhouse grocers: Casey’s General Stores Inc.(NASDAQ: CASY), a large presence in the US Midwest, and Shoprite Holdings Ltd. (OTC: SRGHY), an industry titan in the sub-Saharan African market.
Der Fall Casey’s
It can be assumed that most US investors on the east and west coasts have had no direct personal experience with the retail units of Casey’s General Stores, but the company is well known in the so-called “flyover country”.
A typical Casey’s outlet will include self-service gas stations, grocery stores, and freshly cooked items including homemade pizzas, sandwiches, subs, and donuts.
Casey’s operates more than 2,200 convenience stores in 16 states, and approximately 57% of its stores are in areas with populations of 5,000 or less. About 17% are in towns with 20,000 or more residents.
The company recently expanded its presence through two acquisitions: a $ 580 million purchase last November from Buchanan Energy, the owner of Bucky’s convenience stores, which operates 94 retail stores and 79 dealer locations primarily in Illinois and Nebraska; and the March 22nd announcement of a $ 39 million purchase of 49 stores in Oklahoma by Circle K Stores Inc.
Casey’s General Store in Fargo, North Dakota. Foto von Rexx W./Flickr Creative Commons.
The pandemic posed a plethora of challenges for US retailers, and Casey’s was no exception.
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“Total revenue for the quarter was $ 2 billion, down $ 240 million, or 11%, year over year. This is due to the approximately $ 275 million decline in retail fuel sales caused by the lower number of gallons sold and the lower retail price of fuel, ”said CFO Steve Bramlage during the conference call on the earnings report third quarter of 2021 last month.
The average retail price of fuel for that period was $ 2.12 per gallon, compared to $ 2.40 per gallon a year ago.
“Total gallons sold for the quarter decreased 9.5% to 518 million gallons,” said the CFO. “Total internal sales increased 3.8% to $ 888 million. Sales of groceries and other merchandise increased $ 42 million, while sales of prepared foods and fountains decreased approximately $ 10 million. ”
The company is turning around to get back on its feet.
During the third quarter conference call, President and CEO Darren Rebelez pointed out that Casey’s “did a significant store reset” to improve customer traffic by reconfiguring shelf placement and owning a private label with more than 100 affordable snack and beverage products was introduced.
“Not only does this allow us to more effectively roll out our private label program, but we believe this has optimized the flow of goods in categories and proximity to the existing SKUs, and has enabled us to create more diversity within the existing categories,” said Rebelez.
On the last review, Casey’s was trading at $ 213.95, closer to its 52-week high of $ 221.29 and far from its 52-week low of $ 117.25.
Shopping properly with Shoprite
Shoprite Holdings is not a household name in the US, but the company is one of the dominant forces in sub-Saharan Africa: Headquartered in South Africa, the company operates more than 2,800 stores in 14 countries and employs 140,000 people.
Best known as a grocery retailer, Shoprite is also active in alcohol, clothing, furniture and home entertainment retail, as well as financial services and pharmaceuticals sales.
Sub-Saharan Africa was a complex place to do business even before the pandemic, and the health crisis aggravated socio-economic structures in many countries on the continent.
As a multinational, Shoprite focuses both on the struggles in its home country – South Africa is plagued by a severe recession and an unemployment rate of more than 30% – and on the potholes that are emerging in other countries, which include currency fluctuations, exchange difficulties, delays in Transportation of goods and other economic instabilities are among them.
The company is withdrawing from Kenya and Nigeria, citing difficulties in continuing to do business in these markets.
A Shoprite grocery store in Zeerust, South Africa. Photo: Ossewa / Wikimedia Commons.
But like Casey’s, Shoprite is about to put itself on a more solid foundation. On March 23, Shoprite launched K’nect Mobile, its own virtual cellular network operator that offers its customers competitive rates and other rewards. On March 29, supermarket brand Checkers launched a premium range, Forage & Feast, supported by Jan Hendrik van der Westhuizen, South Africa’s first Michelin-starred chef.
In early March, the Shoprite and Checkers stores announced plans to launch Elephant’s Cousin, an exclusive wine label.
South Africa’s wine farms were hit hard by pandemic-season import-export restrictions and the weak local economy, and the company bought 1.5 million liters of wine from farms that would otherwise have no market.
For the six months ended December 27, Shoprite reported sales of $ 5.6 billion, up 4.7% year over year, and 4,305 job creation.
The company’s greatest strengths were in the South African food sector (plus 5.6% compared to the previous year), in furniture sales (plus 15.7%) and in the combination of the other business areas (plus 10%), but the main disadvantage was the non- South African grocery sales (down 8.4% year on year).
“It is noteworthy that the group increased trading income by 18.3% while making significant progress in other areas,” said CEO Pieter Engelbrecht.
“Debt dropped R5.9 billion ($ 402 million) to R5.5 billion ($ 375 million), inventories dropped R3.0 billion ($ 204.5 million) and we were alive well within our means in terms of investments of R1.6 billion ($ 109 million). “
On the last review, Shoprite was trading at $ 10.57, closer to its 52-week high of $ 11.07 and far from its 52-week low of $ 5.35.
The judgment
Both Casey’s and Shoprite weathered the turmoil of the pandemic in admirable ways – Shoprite in particular as it operates in several countries with more dangerous economies.
Both companies have responded intelligently and are well positioned to move forward in the post-pandemic era.
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For investors looking for broader international exposure to their portfolio, Shoprite would be an invigorating stock pick. A word of caution: a little research on the economies of sub-Saharan Africa in general, and South Africa in particular, should precede any stock purchase.
But for investors who prefer a company that can offer stability and the promise of sustainable growth, you can’t go wrong with Casey’s. In this fight, Casey’s appears to be the better bet.
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