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SHOPRITE HOLDINGS LIMITED - Operational update for the quarter ended September 2021

Release Date: 15/11/2021 08:00
Code(s): SHP     PDF:  
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Operational update for the quarter ended September 2021

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 ENDED SEPTEMBER 2021



This voluntary announcement is aligned with the Group's AGM and serves to 

update shareholders on the Group's first quarter ("the quarter") sales 

growth.



Notwithstanding the incredibly challenging start to our 2022 financial year 

due to civil unrest in the provinces of KwaZulu-Natal and Gauteng, the 

Shoprite Group has increased sales by 9.3%. No adjustment has been made to 

this growth or any reported growth in this update for the impact of the July 

2021 civil unrest in South Africa.



In the interests of full disclosure and in accordance with IFRS 8: Operating 

segments, the Group discloses sales by operating segment and the table below 

outlines this detail: 

Sales growth from continuing operations for the three months to 

September 2021 over the corresponding three months ended September 2020:

                                                                     Change

                                                                          %

Total Group (excluding Supermarkets RSA LiquorShop)                     7.9

Total Group (including Supermarkets RSA LiquorShop)                     9.3

By segment:

Supermarkets RSA (excluding LiquorShop)                                 9.9

Supermarkets RSA (including LiquorShop)                                11.6

Supermarkets Non-RSA                                                    1.9

Furniture                                                             (10.5)

Other operating segments                                                7.3



Supermarkets RSA

The Group's core business, Supermarkets RSA, increased sales by 11.6%. 



It is worthwhile noting this growth was achieved notwithstanding the 

following factors and their significant impact on the quarter: 

-  The mandated closure of the segment's LiquorShop business, which due to

   South African COVID-19 lockdown regulations was not able to trade for

   48 of the 91 days in the quarter (this compares to 60 days closed in

   the prior year over the same period);

-  The devastating July 2021 civil unrest in KwaZulu-Natal and Gauteng

   which resulted in 135 RSA supermarkets and 54 RSA LiquorShops being

   severely impacted due to looting and/or fire damage. As previously

   communicated, precautionary measures and logistical impediments also

   kept adjacent stores not directly impacted from trading in the impacted

   regions closed for a period of a few days up to a week in certain

   instances. 



Notwithstanding these factors, the Group's Supermarkets RSA segment 

represented by Shoprite, Usave, Checkers and Checkers Hyper continued to 

report market share gains over the quarter. Internal selling price inflation 

for the quarter measured 3.3%, virtually unchanged from the 3.4% reported 

for the Group's second half-year period to June 2021. 



With reference to the damage caused by the abovementioned civil unrest, 

the Group estimates the book value of the damage to property, fixtures and 

fittings, stock and fleet to be in the amount of R1.25 billion. Shoprite has 

Sasria (South African Special Risks Insurance Association) cover in place to 

the value of R1.5 billion and we can confirm to date that an initial 

R500 million payment was received from Sasria in September 2021. 



Outside of the remarkable efforts across the business to re-open our stores 

impacted by the riots it has been a busy quarter in terms of store openings 

as reflected by the addition of 29 new stores: two Checkers, one Shoprite, 

eight Usave, 17 LiquorShops and one Petshop Science. On a net basis store 

growth for the segment over the quarter measured 26 new stores. The Group's 

core Supermarkets RSA operating segment is on track to open its planned 

131 new stores for our 2022 financial year.



At the end of the quarter, 47 stores extensively damaged by fire and/or 

looting in the riots remained closed. Of these, 17 are expected to open by 

June 2022. The remaining 30 stores are mostly LiquorShops, Usaves and 

Shoprite's in that order, as well as two Checkers Hyper stores. Of these 

6 will not reopen and the remaining 24 stores will take longer and some may 

require relocation.



The Group's financial services business has continued to progress and 

integrate its offering with the recent linking of the Shoprite Money Market 

Account to our Shoprite Xtra Savings Rewards Programme. This free digital 

account is accessible on both smart and feature phones via the Shoprite app, 

USSD, WhatsApp and now the Xtra Savings card. The Shoprite Money Market 

Account offers customers both a zero-fee mechanism for savings as well as a 

fee free transactional account for purchases and money transfers within the 

Shoprite ecosystem. Our recent partnership with Grindrod Bank also enabled 

our Money Market Account holders to withdraw cash at a low flat fee of R5, 

when the cash function is activated. The Shoprite Money Market Account is 

now giving the Group's banked and unbanked customers free access to basic 

transactional banking services.



On the digital front, the Group's pioneering on-demand 60-minute delivery 

app Checkers Sixty60 (Sixty60) continued its stellar growth trajectory over 

the quarter. It is clear, following a record quarter in terms of sales, that 

Sixty60's pivotal role within the Group's omnichannel framework has become 

entrenched. We are pleased by its sustained growth and its meaningful role 

in terms of providing a convenience solution for our customers in our 

mid-to-upper Checkers and Checkers Hyper value supermarket chains.



The Group's ShopriteX tech hub continues to evolve the Group's omnichannel 

plans as evidenced by the recent integration of the Checkers Xtra Savings 

Rewards Programme with Sixty60. As a result of this exciting initiative 

Checkers Xtra Savings Rewards Programme customers are now able to get their 

Xtra Savings Rewards and personalised offers when shopping on the Sixty60 

app. Delivering this functionality is an example of continued digital and 

data advances made possible by our ShopriteX tech team leading with customer 

centricity by combining the benefits of reward card savings, customer data 

and 60-minute delivery.



In terms of the Group's proposed acquisition of select businesses from 

Massmart Holdings Limited and the integration and rebranding of the 111 

stores that make up Masscash Cash & Carry and Cambridge Foods (including 

the adjacent liquor stores), the process of obtaining regulatory approvals 

is ongoing and the transaction is expected to be finalised by our 2022 

year-end.



Supermarkets Non-RSA

Following a period of restructure, Supermarkets Non-RSA increased sale of 

merchandise for the quarter by 1.9%. The performance of the segment was 

underpinned by the strength of our Zambian operations. Overall, our Non-RSA 

business's growth in constant currency continues to be eroded on translation 

into the Group's reporting currency, the Rand, but nonetheless a return to 

Rand based growth, albeit at a low level, is positive. On a constant 

currency sales growth basis Angola has stabilised, however in Rand terms 

remains down for the quarter. 



Supermarkets Non-RSA continuing operations' store growth was limited to one 

new store in Zambia. 



In line with our 2021 year-end reporting, the Group's operations in Uganda 

and Madagascar will remain classified as discontinued operations for the 

Group's first half reporting for 2022. As part of this process, the Group 

concluded its sale of assets pertaining to its five stores in Uganda during 

the quarter and it is anticipated the sale of assets pertaining to Group's 

Madagascan business will be concluded by our 2022 year-end. 



Furniture

The Group's Furniture segment's sales declined by 10.5% during the quarter. 

This is in part a result of the high sales growth base created over this 

period last year during which sales increased by 20.6% but also a 

consequence of the impact of the July 2021 civil unrest which resulted in 

35 stores being closed due to severe damage and a considerable number of 

adjacent stores in the impacted regions being closed during the month of 

July 2021 for precautionary reasons (11 remain closed).



The segment remains mostly cash sales based with credit sales participation 

measuring 13.1% of sales for the quarter. 



The Group's furniture business store base increased by two new stores during 

the quarter. With regards the 11 extensively damaged stores still closed due 

to the residual impact from the civil unrest, eight of these are expected to 

reopen within the year with the remaining three locations to potentially 

close and/or to be relocated. 



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 7.3% increase in sales.



The OK Franchise division increased sales by 4.2% with a net seven stores 

closed (ten new stores and 17 closures, including 1 permanent closure as a 

result of the civil unrest). The division was impacted during the quarter 

by the civil unrest and the cancellation of the franchise agreement of a 

13-store franchisee. 



Outlook

As a result of the 13 September 2021 move to adjusted level 2 in terms of 

South African COVID-19 lockdown regulations, it is pleasing to report that 

to date, our second quarter trade has been operating without restrictions in 

terms of COVID-19 lockdown regulations. It is noteworthy in terms of base 

effects that COVID-19 regulations kept our RSA LiquorShop business closed 

for 19 out of 91 days during the second quarter of our financial year last 

year. 



Looking ahead to the festive trading season, we can confirm the Group is 

well positioned and we believe adequately stocked across the board. As such 

we are optimistic regarding our ability to execute on our plans to provide 

unsurpassed value and range to our customers over this all-important period 

in our calendar.



In terms of our next reporting date, the Group plans to issue its 2022 first 

half sales update by the end of February 2022 and report its interim results 

in March 2022. Further detail in terms of reporting dates, as they are 

finalised, will be available on the Group shareholder diary on the 

company website via https://www.shopriteholdings.co.za/shareholders-

investors.html?main=investor&sub=results&scroll=investorsec.



The information contained in this announcement has not been reviewed or 

reported on by the Group's external auditors.



15 November 2021



Sponsor: Nedbank Corporate and Investment Banking



Enquiries:

Shoprite Holdings Limited Tel: 021 980 4000

Pieter Engelbrecht, Chief Executive Officer

Anton de Bruyn, Chief Financial Officer

Natasha Moolman, Investor relations


Date: 15-11-2021 08:00:00
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