Shoprite sees boost in sales and earnings despite lockdown and alcohol sales ban

South Africa’s biggest retail group, Shoprite, has published a voluntary trading update giving guidance to shareholders on its full year results for the 52 weeks ending June 2020.

Despite difficult trading conditions, including the Covid-19 pandemic and subsequent nationwide lockdown, the group said that it managed to increase total sale of merchandise for the 52 weeks by 6.4%, to approximately R156.9 billion. Like-for-like growth for the year was 4.4%.

In South Africa, the retail giant saw sales growth (including liquor) of 8.7% for the year, underpinned by a strong second half in which sales grew 7.5%, notwithstanding a high second half base in the prior year during which fourth quarter sales grew by 9.4%.

The Covid-19 lockdown had a major impact on operations, where customer visits for the year declined by 7.4%. However, this was balanced out by the average basket spend increasing by  18.4%, it said.

Operations outside South Africa did not fare as well, seeing an overall decline of 1.4%, while the group’s furniture sales took a significant hit, down 11.9% year-on-year.

Lockdown and alcohol sales ban

South African Covid-19 lockdown regulations implemented from 27 March 2020 restricted trade in several categories within the group’s supermarket business and as such, impacted the business differently at different times.

“However, across the board, our Checkers, Checkers Hyper, Shoprite and Usave brands performed admirably in what can only be described as incredibly difficult conditions for both our employees and customers,” it said.

The two weeks preceding South Africa’s initial 35 days of Level 5 lockdown resulted in elevated sales growth across all three supermarket brands – but noteworthy was the significant growth reported by the repositioned mid-to-upper end Checkers (including Checkers Hyper) business which now represents 39.6% of Shoprite South Africa’s sales.

The alcohol ban had a significant impact, the group said.

The sales growth momentum achieved in the liquor business during the first half continued up to February and accelerated, pre-lockdown, during March.

Covid-19 lockdown regulations required the complete closure of liquor businesses for 66 days and subsequently restricted trade to four days a week (Monday to Thursday) for the month of June.

“The combined result of a first half during which sales grew by 20.5% followed by a second half during which sales declined by 29.5%, resulted in a year in which sales declined by 3.3%. Liquor represents 5.8% of Supermarkets RSA’s sales,” the group said.

The group noted that it incurred a net total of R327.2 million on direct Covid-19 costs, spent across the areas of health and  safety, security, mobile clinics, personal protective equipment, temperature  scanners, store and distribution centre sanitation, employee meals,  communication costs and remote network access for employees.

Financial results

Given this backdrop, Shoprite provided the following guidance to shareholders for the 2020 financial year (cents per share):

Earnings including discontinued operations:

  • Basic earnings per share at between 601.9 to 652.0 (-3.7% to 4.3% change from 2019)
  • Basic headline earnings per share between 748.1 to 804.1 (7.0% to 15.0% change from 2019)
  • Adjusted basic HEPS excluding the once-off Covid-19 costs at 757.6 to 806.2 (24.8% to 32.8% change from 2019)

Earnings from continuing operations:

  • Basic earnings per share at between 594.1 to 649.1 (-13.6% to -5.6%  change from 2019)
  • Basic headline earnings per share between 735.6 to 795.4 (-1.6% to 6.4%  change from 2019)
  • Adjusted basic HEPS excluding the once-off Covid-19 costs at 742.9 to 792.0 (21.1% to 29.1% change from 2019)

Read: You can now pay for groceries with your phone at Shoprite, Checkers

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