Wrap Text
Operational update for the quarter ending September 2020
SHOPRITE HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
Reg. No. 1936/007721/06
ISIN: ZAE000012084
JSE Share code: SHP
NSX Share code: SRH
LuSE Share code: SHOPRITE
("Shoprite Holdings" or "the Group")
OPERATIONAL UPDATE FOR THE QUARTER ENDING SEPTEMBER 2020
The Group's 2021 financial year has begun in earnest. Across the business
adherence to strict COVID-19 protocols has become part of daily operations,
whilst execution on growth across our store base, digital and customer first
projects has continued.
In accordance with our 2020 year-end guidance expectations, the impact of
COVID-19 lockdown regulations on RSA liquor trade was particularly marked
over the quarter given it required our Supermarkets RSA LiquorShop business
to remain closed for 60 of the 91 days in the period. The loss of trade
notably impacted our Supermarkets RSA segment's sales growth and
consequently Group growth and it is for this reason we have provided metrics
including and excluding RSA LiquorShop's sales for both. Notwithstanding,
the Group's continued focus on gross margin and expense management continued
unabated and has delivered positive results for the quarter.
Sales growth from continuing operations for the three months to
September 2020 over the corresponding three months ended
September 2019:
Change
%
Total Group (excluding Supermarkets RSA LiquorShop) 6.0
Total Group (including Supermarkets RSA LiquorShop) 3.0
By segment:
Supermarkets RSA (excluding LiquorShop) 7.2
Supermarkets RSA (including LiquorShop) 3.3
Supermarkets Non-RSA (8.4)
Furniture 20.6
Other operating segments 9.9
Supermarkets RSA
The Group's core business, Supermarkets RSA, inclusive of our LiquorShop
business, which due to South African COVID-19 lockdown regulations was
closed for 60 of the 91 days in the quarter, increased sales by 3.3%.
The Supermarkets RSA segment represented by Shoprite, Usave, Checkers and
Checkers Hyper continued to report market share gains over the quarter.
Sales excluding LiquorShop increased by 7.2%. Growth amongst the
aforementioned brands that make up the segment remains led by our mid-to-
upper end Checkers and Checkers Hyper banner. Internal selling price
inflation for the quarter measured 4.4%.
The net store movement for the period for the segment measured 16 new
stores. Across our three supermarket trading brands Shoprite, Usave,
Checkers and Checkers Hyper we opened 25 new stores in the quarter: five
Shoprite stores; two Checkers FreshX stores; one Checkers Hypermarket; eight
Usave stores (including two Usave eKasi container stores) and nine
LiquorShops.
Supermarkets Non-RSA
In line with the reporting of our 2020 year-end financials, as a result of
the ongoing process pertaining to the sale of all or part of Retail
Supermarkets Nigeria Limited, our Nigerian business remains classified as a
discontinued operation and as such is not included in the reporting for this
segment. Negotiations in this regard continue and the Group hopes to
finalise this transaction during the second half of our current financial
year.
Supermarkets Non-RSA's onerous operating paradigm has been impacted further
by COVID-19 lockdowns and their associated restrictions. Notwithstanding
this, some countries for example Zambia have traded well, whilst others,
namely Angola, remain under pressure. Across the board however, an admirable
performance in local currency for the most part has been eroded by currency
devaluation, which has negatively impacted translation into our reporting
currency, the rand, in which sale of merchandise for the quarter declined by
8.4%.
In terms of store movement over the quarter, three stores were opened (one
in Zambia, one in Eswatini and one in Lesotho) and three stores were closed
(two in Angola and one in Kenya). In line with the Group's prior statement
pertaining to our Kenyan operations we expect to exit our two remaining
stores by our financial year-end.
Furniture
The Group's Furniture operating segment made up of OK Furniture and
House & Home increased sales by 20.6%. The segment remains mostly cash
sales based with credit sales participation measuring 11.7% of sales for
the quarter.
The Group's furniture business continues to consolidate its store base with
a net closure of seven stores (nine closures and two openings).
Other operating segments
The Group's Other operating segments, made up of OK Franchise, Computicket,
Transpharm and Medirite Pharmacies as well as Checkers Food Services,
reported a 9.9% increase in sales. The OK Franchise division increased sales
by 8.5% with 26 net new stores (36 openings and ten closures).
Outlook
Pursuant to the finalisation of the terms of the 25 February 2020 SENS, in
which the Group outlined the establishment of Retail Logistics Fund
Proprietary Limited, Shoprite Holdings received the cash consideration of
R1.2 billion during November 2020. This, together with the results of our
continued focus on working capital, US dollar borrowing reduction and
measured capital allocation bodes well for continued improvement in the
Group's net cash position.
From a digital transformation perspective we continue to execute well on our
Group wide strategy. Noteworthy in this regard was the successful launch of
the Group's Xtra Savings Rewards Programme in our Shoprite RSA supermarket
business during October. This is a milestone event for the Group, timed to
bring our Shoprite Xtra Savings Rewards Programme customers even more value
at a time they need it most. To date, our Xtra Savings Rewards Programme has
surpassed 12 million sign ups, half of which can be attributed to our
Shoprite customer sign ups since the launch, five weeks ago. The Group's
Xtra Savings Rewards Programme is an important foundational building block
for the Group, allowing us to execute on our precision retailing objectives.
Whilst firmly focussed on our customers, our efforts to future-fit our
channels continues to gain momentum. Notably, our Checkers Sixty60 one hour
delivery service has won three top tier innovation awards in the past month
namely the People's Choice Award and the Best Enterprise Solution at the
2020 MTN Business App of the Year Awards, as well as the 2020 BCX Digital
Innovation Award in the Corporate category. Furthermore, the accolade of
Best Convenience and Grocery Store of the Decade in the 22nd annual Sunday
Times Top Brands survey awarded to Shoprite earlier this month was a great
honour and an achievement of which we are very proud.
It is pleasing to report that from last week (12 November 2020) the South
African nationwide lockdown regulations pertaining to the restriction of
off-consumption liquor trade were lifted. The result of this is that our
sizable retail LiquorShop business, previously restricted from trading over
weekends and mid-week after 5pm, is now able to trade seven days a week.
This is a meaningful change for the Group and comes at a significant time as
we begin our important festive season period.
The information contained in this announcement has not been reviewed or
reported on by the Group's external auditors.
16 November 2020
Sponsor: Nedbank Corporate and Investment Banking
Enquiries
Shoprite Holdings Limited Tel: 021 980 4000
Natasha Moolman - Investor Relations Manager
Anton de Bruyn - Chief Financial Officer
Pieter Engelbrecht - Chief Executive Officer
Date: 16-11-2020 08:00:00
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