Excluding Sixty60, Checkers is stagnant

Shoprite Holdings is spectacularly run, and has world-class retailing businesses within it. This is not written as an attack on what is arguably the best retail management team on the planet, but rather to cut through the consensus in the market and highlight some unspoken aspects of the Checkers Sixty60 on-demand delivery service.

Last week, Shoprite’s 52-week operational update came out – and it painted a wonderful picture, with the group reporting sales up 7.2% and the all-important Supermarkets RSA showing sales growth of 7.1%.

Read:
Shoprite sees earnings rising as Sixty60 booms
Did Shoprite open a Checkers Hyper too many?

Within Supermarkets RSA (84.5% of group sales), the important like-for-like (LFL) sales growth was 2% – interestingly, behind some key competitors (Pick n Pay Corporate stores 3.2%, Woolworths 3.7%, and Boxer 3%).

With inflation up 0.8% during the period, this implies LFL volume growth of 1.2% (2% – 0.8%).

In its update, Checkers & Checkers Hyper (inclusive of LiquorStore) reported sales growth of 10%, inflation of 2% for Checkers and 1.2% for Checkers Hyper – and Checkers Sixty60 grew a whopping 34.5% to R25.5 billion.

So here is the first question …

If we take Sixty60’s stellar growth out of Checkers’s own LFL sales growth, is Checkers still growing at a physical, same-store level?

This is not easy to calculate, given that limited disclosure has been given, and I will be the first to admit that the following is just an estimate.

But we can reverse-engineer Sixty60’s historical sales per year now that we have a baseline of R25.5 billion; we can strip those figures out of Checker’s own segmentally reported figures.

What this analysis reveals is that – in the absence of Sixty60 – Checkers is a much slower-growing retail business (only around 3.9% in FY26).

Once you exclude an assumed 2-4% space growth and inflation of around 2% from that figure of around 3.9%, Checkers (excluding Sixty60) LFL sales volume growth is actually flat-to-negative.

Sources: Various Shoprite reports, Claude, and analyst workings and assumptions

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This makes me think each new store Checkers is rolling out is likely more and more marginal – and thus, Sixty60 is more and more important.

But why does this matter?

Sixty60 sales and volumes are flowing through Checkers stores (and thus Shoprite’s ecosystem), so why would it matter if store-level in-person sales growth is much slower?

Firstly, Checkers does not just sell products in its stores.

In fact, a disproportionate amount of margin comes from digital and financial products such as airtime and money transfers.

If there are fewer in-person purchases, then it is logical that there will be fewer purchases of high-margin items only sold in-store.

The fact that Shoprite is still rolling out actual fitted Checkers stores, and not ‘dark stores’ for delivery only, implies that it still thinks there is value in in-person shopping …

(To be fair, Sixty60 could surely add some of these to its app? This idea is free, Shoprite. The next one I charge for.)

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What if Checkers’ in-person LFL sales keep stagnating?

What will the vast Checkers footprint look like in a future where the most marginal stores are only doing Sixty60 deliveries?

Why even keep these stores’ lights on?

Why not convert them into dark stores (but at what cost and what disruption)?

But I suspect that Checkers’s (excluding Sixty60) stagnation is not entirely due to its in-person shoppers turning to its more convenient deliveries.

At store level (and in traffic), Sixty60 has another subtle cost to the system …

I have noticed that visits to my local Checkers are increasingly unpleasant as Sixty60 pickers push past me to grab products and make their deliveries with little regard for my in-person shopper experience.

And I’m sure readers of this article will have some colourful experiences of Sixty60 drivers zooming wildly around them in traffic.

Read:
The next battleground for Woolies and Checkers …
Sixty60 Pixie powers personalised, predictive grocery shopping
How Shoprite built a R1bn-plus media, insights business in plain sight

Sixty60 pickers are clearly not incentivised to improve my in-store experience (or safety on the road) but are likely driven by delivery turnaround times.

In short, in the absence of Sixty60, Checkers would be a low- to no-growth retailer. But the success of Sixty60 is perhaps ironically risking this footprint as it may start to starve the very stores – which it requires for its deliveries – of their foot traffic.

Given its success, Sixty60 now accounts for almost a quarter of Checkers sales and has single-handedly contributed about two-thirds of Checkers sales growth since launch.

As I said, Shoprite Holdings is spectacularly run and has world-class retailing businesses within it. The problem is that this view is all we hear all the time. Thus, I thought it might be valuable to highlight some problems.

* Keith McLachlan is CEO of Element Investment Managers.

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