Shoprite Holdings Limited · JSE:SHP
Shoprite — FY2023 Earnings Presentation
51 slides from Shoprite's earnings presentation, Sep 5, 2023
Slide 1: 2023 Results Presentation
2023 Results Presentation For the 52 weeks ended 2 July 2023
Slide 2: Agenda
Operational Review 01 Pieter Engelbrecht Financial Results 02 Anton de Bruyn Strategy Update 03 Questions Pieter Engelbrecht
Slide 3: Operational Review
Operational Review Pieter Engelbrecht Chief Executive Officer
Slide 4: Proud of the daily dedication of the team
Proud of the daily dedication of the team Our culture is becoming our competitive advantage Resilience Agility Relevance Shoprite Holdings 2023 Full Year Financial Results
Slide 5: Surpassed the R200bn sales milestone
Surpassed the R200bn sales milestone A Stronger, Smarter Shoprite • Industry-leading growth continued after our multi-year transformation investment • Advanced analytics optimising the core business in the absence of economic tailwinds • Invested in low prices for customers facing high interest rate
Slide 6: Exceptional sales performance in demanding conditions
Exceptional sales performance in demanding conditions +R31.1bn Additional sales (2022**: +R16.0bn) R215.0bn R51.7bn +9.7% Sales Gross profit (+14.8%) DHEPS +16.9% +10.6% Like-for-like* 24.1% Gross margin +10.5% 663c dividend * Like-for-like sales growth constitutes pro forma financial information in
Slide 7: Record customers, volumes and market share gains
Record customers, volumes and market share gains +13.2% +4.9% +R8.1bn Customer visits Item volume growth RSA FY23 market share gain* +335m Additional items +3.9% 7.1bn 52 months of uninterrupted Basket size growth Items sold market share gains *Value of above-market share growth Source: NielsenIQ, 5
Slide 8: Balanced customer portfolio performing well: Checkers
Balanced customer portfolio performing well Supermarkets RSA: Checkers & Checkers Hyper R69.3bn 18.0% 14.8% 20.4% 10.6m Private label participation Sales value Sales growth RSA Market share* Xtra Savings members (excl. liquor) 261 stores Best value in fresh and premium foods Omnichannel market leade
Slide 9: Balanced customer portfolio performing well: Shoprite & Usave
Balanced customer portfolio performing well Supermarkets RSA: Shoprite & Usave R90.0bn 15.6% 19.1% 21.2% 17.2m Private label participation Sales value Sales growth RSA Market share* Xtra Savings members (excl. liquor) 615 stores Africa’s low price grocery leader Lowest prices on trusted grocery bran
Slide 10: Industry-leading growth in Supermarkets RSA
Industry-leading growth in Supermarkets RSA • Supermarkets RSA sales growth of 17.8% (10.3% like-for-like) • Checkers remains the fastest growing grocer in the premium food segment • Sales growth excluding Massmart acquisition +16.2% • LiquorShop sales growth +30.8% • Sixty60 sales growth +81.5% • 1
Slide 11: Customers are stretching budgets
Customers are stretching budgets Supermarkets RSA More customers seeking More combo deals and More customers choosing promotions collective buying ‘cheapest on shelf ’ private label 55.5% 55.5% +5.3 percentage points Promo sales contribution over 2 years 41.4% FY21 FY23 FY21 FY22 FY23 Sales contribu
Slide 12: 322 days of rolling blackouts increasing cost-to-serve
322 days of rolling blackouts increasing the stores' cost-to-serve Supermarkets RSA • Keeping doors open AND food fresh 24/7 during unprecedented rolling blackouts in SA • R1.3bn diesel costs to power generators across all stores, DCs and offices • Knock-on cost pressures across the food value chain
Slide 13: Unconditional savings for customers
Unconditional savings for customers Supermarkets RSA Instant cash savings Accessible prices Affordability obsession R13.5bn in Xtra Savings discounts in FY23 +130m R10 products sold in FY23 +623m R5 meals and R5 bread since 2016 0% price inflation Shoprite Holdings 2023 Full Year Financial Results
Slide 14: Multi-year market share advances
Multi-year market share advances Supermarkets RSA Record value of market share gain FY23* Achieved annual market share of 33.9% following multi-year gains R4.6bn R8.1bn Rest of Market Shoprite Group 80% 40% R3.5bn 70% 30% 60% 20% June 2020 June 2023 *Value of above-market growth Source: NielsenIQ, 5
Slide 15: Supermarkets Non-RSA, Furniture and Other Operating Segments
Supermarkets Non-RSA, Furniture and Other Operating Segments Supermarkets Non-RSA Supermarkets Non-RSA Narrowed regional scope (9 countries) reducing operational complexity trading profit +16.4% 650 R594m • Achieved R500m medium-term trading profit target 594 600 550 R479m 479 • Total 230 stores (op
Slide 16: Financial Results
Financial Results Anton de Bruyn Chief Financial Officer
Slide 17: Massmart acquisition
Massmart acquisition Stores acquired Number of Effective date 9 January 2023 stores Shoprite 51 Usave 1 Stores acquired 94 stores + 1 meat plant Shoprite LiquorShop* 42 Total acquired 94 Assets & liabilities acquired Purchase price R662 million Rm Property, plant and equipment 322 Right-of-use asset
Slide 18: Financial highlights
Financial highlights Sales Total income Total expenses Trading profit R215.0bn +15.6% +18.6% R11.9bn +16.9% +15.2% +14.9% excluding additional loss of profit excluding additional Shoprite Employee Trust +5.7% +10.6% Like-for-like* insurance claim distributions, additional diesel in Supermarkets RSA
Slide 19: Sales unpacked
Sales unpacked Restated* Like-for- Change 2023 2022 like Supermarkets RSA Sales % Rm Rm % Brand contribution and sales growth Supermarkets RSA 17.8 173 634 147 368 10.3 Supermarkets Non-RSA 16.4 19 622 16 857 16.3 R69.3bn Furniture 5.1 7 064 6 723 2.0 R90.0bn Contribution: 39.9% Contribution: 51.9%
Slide 20: Supermarkets RSA store expansion
Supermarkets RSA store expansion Number of Net Number of stores movement stores 2022 Store movement 2023 2023 Shoprite 534 3 33 51 81 615 Checkers 239 1 23* 22 261 Checkers Hyper 36 2 2 38 Usave 410 5 35 1 31 441 LiquorShop 570 1 73 40** 112 682 PetShop 22 31 31 53 OtherOther 9 3 25 22 31 *** Total
Slide 21: Trading profit: total income unpacked
Trading profit: total income unpacked Margin Change 2023 2023 Other operating income analysis Continuing operations % Rm % Gross profit 14.8 51 706 24.1 Commissions received Other operating income 25.4 3 909 1.8 R1 141m Interest revenue 22.2 665 0.3 Delivery recoveries Share of profit of equity R627
Slide 22: Trading profit: total expenses unpacked
Trading profit: total expenses unpacked 2023 Expenses net Change 2023 Exclusions Change of exclusions Continuing operations % Rm Rm % Rm Depreciation and amortisation 17.1 6 305 - 17.1 6 305 Employee benefits 15.3 17 027 (107) 13.1% 14.6 16 920 Electricity and water 36.6 4 937 (1 101) 6.1 3 836 Othe
Slide 23: Trading profit by segment
Trading profit by segment Trading Restated* margin Change 2023 2022 2023 Continuing operations % Rm Rm % Supermarkets RSA 5.6 10 841 10 263 6.2 Supermarkets Non-RSA 24.0 594 479 3.0 Furniture (50.7) 104 211 1.5 Other operating segments 17.6 427 363 2.9 Total continuing operating segments 5.7 11 966
Slide 24: Net finance costs
Net finance costs Restated* Change 2023 2022 Continuing operations % Rm Rm Interest received from bank account balances 67.8 453 270 Borrowings and other finance charges 68.6 (595) (353) Lease liabilities finance charges 16.3 (3 070) (2 640) Net finance costs 18.0 (3 212) (2 723) Increase in finance
Slide 25: Financial Overview
Financial Overview Borrowings Borrowings to equity ratio US dollar borrowings R6.4bn 24.2% US$29m R5.5bn 25% - 30% 8.5% 2022 Target of total borrowings Change in right-of-use assets Net changes in working capital* Net cash +R3.1bn (R175m) R6.6bn Inventory (R 3 059m) Change in lease liabilities Trade
Slide 26: Capital spend
Capital spend MAINTAINING EXPANDING THE BUSINESS THE BUSINESS 31% 69% CAPITAL SPEND AS % OF SALES 2023: 3.1% 2022: 2.9% CAPITAL SPEND AS % OF SALES Store Excluding capital spend on maintenance Massmart and social unrest R1 850m Sales growth 2023: 3.0% Other R89m R3 871m IT Margin expansion CAPITAL S
Slide 27: Supply chain expansion
Supply chain expansion 2024 2025 Canelands DC (KwaZulu–Natal) Riverfields DC (Gauteng) Expansion funded through Retail Logistics Fund (RF) (Pty) Ltd Expansion funded through Equites Property Fund Ltd Lease commencement date Dec 2023 Lease commencement date Jul 2024 Size 38 167m2 Size 93 737m2 Shopri
Slide 28: Inventories
Inventories Restated* INVENTORIES Inventories as % of sales 2023 2022 from continuing operations % % 2023: R25.1bn Supermarkets RSA 11.7 11.7 2022: R21.9bn Supermarkets Non-RSA 11.4 13.9 +14.7% +14.6% Furniture 24.8 24.8 SUPERMARKETS RSA Other operating segments 5.6 4.9 R20.3bn Total continuing oper
Slide 29: Free cash flow
Free cash flow Rbn FREE CASH FLOW CONVERSION RATIO 18.8 2023: 62.6% (0.4) NORMALISED 2023: 68.6% 1.4 OPERATING CASH CONVERSION RATIO (2.7) (0.2) Normalised free cash flow Additional 2023: 99.1% 12.6 Supermarkets RSA (2.1) diesel spend Effective tax rate: 1.1 30.8% (3.3) 11.5 Refurbishments: (R0.4bn)
Slide 30: 2024 Guidance considerations
2024 Guidance considerations Sales Massmart stores should contribute R2.5bn in H1. In base from H2. Operating costs Diesel generator expense to continue, in base from September 2023. Insurance claim included in 2023 other income, will not repeat. Tax Effective tax rate 30% - 31%. Capital allocations
Slide 31: Strategy Update
Strategy Update Pieter Engelbrecht Chief Executive Officer
Slide 32: Our Shoprite Purpose
Our Shoprite Purpose Uplifting lives every day by pioneering access to the most affordable goods and services, creating economic opportunity and protecting our planet. Shoprite Holdings 2023 Full Year Financial Results
Slide 33: 9 Strategic Priorities guide our daily decision-making
9 Strategic Priorities guide our daily decision-making A Smarter Target headroom Winning in the Shoprite opportunities long term 1 A TRULY 4 TRUSTED, 7 UNLOCK CUSTOMER- PROFITABLE ALTERNATIVE FIRST CULTURE PRIVATE LABELS INCOME 2 FUTURE-FIT 5 GROW SHARE IN 8 FORCE CHANNELS AND PREMIUM AND FOR GOOD T
Slide 34: A busy year
A Smarter Target headroom Winning in the Shoprite opportunities long term A busy year First retailer in the country to officially stock Employee Trust Prime Hydration distributions impact of Launched Little Shop 3 R235m promotion with 24 mini collectables July 2022 June 2023 Launched our own Group c
Slide 35: A busy year
A Smarter Target headroom Winning in the Shoprite opportunities long term A busy year Launched CredX, giving First retailer in the country suppliers access to working to officially stock Employee Trust capital funding Prime Hydration distributions impact of Launched Little Shop 3 Launched Homegrown,
Slide 36: A busy year
A Smarter Target headroom Winning in the Shoprite opportunities long term A busy year Launched CredX, giving First retailer in the country suppliers access to working Launched Money Market to officially stock Prime Employee Trust distributions impact of Launched Little Shop 3 Account, South Africa’s
Slide 37: A Smarter Shoprite
A Smarter Target headroom Winning in the Shoprite opportunities long term A Smarter Shoprite ✓ Xtra Savings Rewards has signed up 27.8m members – voted SA’s No. 1 Retail Rewards Programme NEW ✓ >80% member sales contribution powering smarter analytics in pricing, promotions and personalisation Custo
Slide 38: Redefining 1-hour online grocery delivery
A Smarter Target headroom Winning in the Shoprite opportunities long term Redefining 1-hour online grocery delivery ✓ Sixty60 sales growth continues with 81.5% increase on top of 149.8% in the prior year ✓ SA’s No. 1 grocery app with national footprint available in 466 locations ✓ Supporting job cre
Slide 39: Trusted, profitable Private Labels
A Smarter Target headroom Winning in the Shoprite opportunities long term Trusted, profitable Private Labels Supermarkets RSA Increasing Private Label Trusted Private Labels Premiumisation of Private Labels contribution 96% • Private label sales growth +19.2% • Top 7 Premium labels in Checkers achie
Slide 40: Grow share in fresh and premium products
A Smarter Target headroom Winning in the Shoprite opportunities long term Grow share in fresh and premium products Headroom in Liquor Focus on Fresh Increasing Sales in Adjacencies 1.3x R2.3bn 3x faster sales growth vs Rest of Market* market share gains in Fresh Food Customer pet category spend** FY
Slide 41: Stronger partnerships
A Smarter Target headroom Winning in the Shoprite opportunities long term Stronger partnerships OK Franchise Brand and Supplier Partnerships • Increasing market share and centralised distribution • Specialty Brand Partnerships • New convenience format for residential suburban growth enhancing fresh
Slide 42: Investing for growth through the cycle
A Smarter Target headroom Winning in the Shoprite opportunities long term Investing for growth through the cycle 382 new stores opened in FY23 with 314 planned in FY24 Increased supply chain capacity BUILD OUR through Retail Logistics Fund STORE (Pty) Ltd (adding 200 000m2 NETWORK TO over the next 2
Slide 43: A Force for Good
A Smarter Target headroom Winning in the Shoprite opportunities long term A Force for Good Installed Supporting 215 Supporting 34.13 Installed 34.15MWp MWp*solar community food gardens 215 community covering food gardens PVPV Solar capacity, capacity, covering more4.5 more than than 4.5 million mill
Slide 44: Leveraging our ecosystem of value
Leveraging our ecosystem of value Shoprite Holdings 2023 Full Year Financial Results
Slide 45: Our Outlook
Our Outlook • Supermarkets RSA sales growth rate for the first six weeks of FY24 remains double digits and ahead of the market, albeit lower than reported in FY23 • Reflects Supermarkets RSA Selling price inflation slowing to a 12-month low in July at 8.6% (3.3% off its peak in Feb 23) • Supermarket
Slide 46: Thank You Questions
Thank You Questions
Slide 47: Additional Information
Additional Information Anton de Bruyn Chief Financial Officer 49
Slide 48: Financial metrics
Financial metrics 2023 2022 Restated* IFRS 16 ROIC excl. IFRS 16 ROIC excl. ROIC impact IFRS 16 ROIC impact IFRS 16 Rm Rm Rm Rm Rm Rm Trading profit 11 916 (2 487) 9 429 11 278 (2 214) 9 064 Effective tax rate 30.8% 30.8% 30.6% 30.6% Trading profit after tax 8 247 (1 721) 6 526 7 822 (1 535) 6 287 I
Slide 49: Diluted headline earnings per share (DHEPS)
Diluted headline earnings per share (DHEPS) Restated* Change 2023 2022 % cents cents DHEPS continuing operations 9.7 1 159.4 1 056.9 DHEPS discontinued operations >100 (70.5) (7.5) DHEPS including discontinued operations 3.8 1 088.9 1 049.4 DHEPS continuing operations 9.7 1 159.4 1 056.9 Adjusted fo
Slide 50: Adjusted DHEPS reconciliation
Adjusted DHEPS reconciliation 2023 Headline 2023 earnings DHEPS* Rm cents Headline earnings including discontinued operations 5 945 1 088.9 Headline loss from discontinued operations 385 70.5 Headline earnings from continuing operations 6 330 1 159.4 Adjusted for the impact of: Shoprite Employee Tru
Slide 51: Items of a capital nature
Items of a capital nature Restated* 2023 2022 Continuing operations Rm Rm Notes to the results: Impairment of property, plant and equipment (96) (46) Non-financial asset impairments 2023 by segment Rm Impairment of right-of-use assets (75) (88) Impairment of intangible assets (37) (12) Supermarkets