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R1.3 billion load shedding bill for South Africa’s biggest retailer

| Economic factors

South Africa’s biggest retailer Shoprite has spent well over R1 billion on diesel to power generators to help mitigate the effects of load shedding.

In an operational update for the 52 weeks ending 2 July 2023, the group said it increased its total sales of merchandise by 16.9% to roughly R215 billion.

The group also added a net 340 stores, taking its total to 3,324 stores from continuing operations.

The group’s core business, Supermarkets RSA, saw sales growth of 17.8% (like-for-like 10.3%), which contributed 80.8% to group sales.

The group’s internal selling price inflation also measured 10.1% (first half period 9.4%; second half period 10.8%).

Checkers and Checkers Hyper saw reported sales growth of 18.0%, whilst Shoprite and Usave saw growth of 15.6%.

LiquorShop sales jumped by 30.8%, with first-half sales growing by 35.6% – which was elevated following lockdown closures the prior year.

Non-RSA supermarkets saw sales increase by 16.4%, and contributed 9.1% to the group’s sales (in rand terms).

The group’s furniture business reported a 5.1% increase (2.0% like-for-like) in sales for the period, while the group’s other operating segments saw a 13.3% increase over the period.

Despite the growth in customers and increasing market share, the group said several issues still affected the period.

Much like other major retailers in South Africa, increased load shedding came with a significant cost.

“The cost of diesel to power generators during load-shedding across our Supermarkets RSA store base amounted to R1.3 billion. It is important to note that this cost became significant at higher stages of load shedding, which occurred from September 2022,” the group said.

Moreover, the group said it remained resolute in bringing lower prices and value to its customers, which will lead to the group’s full-year gross margin being lower than reported last year (restated 2022: 24.5%). This decline, however, is expected to be lower than the gross margin reported in the group’s 2023 interim results.

“Other less considerable but still noteworthy expenses include the impact of a full year of distributions paid to Shoprite Group employees from the Shoprite Employee Trust and the onboarding of the 4 480 employees from January this year, as part of the above-mentioned stores acquired from Massmart,” it added.

It said it would release its year-end results for the period ended 2 July 2023 on 5 September 2023.

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