Wrap Text
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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