SHOPRITE HOLDINGS LIMITED - Operational update for the quarter ending September 2020

            
SHP
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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