SOUTH AFRICA – South African retailer Pick n Pay has delivered a positive performance in its first half year ended August 2022, registering 11.5% growth in group turnover.
This strong turnover growth, in part, reflects the normalization of the environment after the July 2021 civil unrest and Covid-19 liquor trading restrictions last year, which negatively impacted the base.
However, when excluding these disruptions in the base, its estimated normalized H1 FY23 turnover rose by an encouraging 8.2%.
Pick n Pay continued to feel the after-effects of the civil unrest in terms of increased insurance and related security costs, additional expense increases from inflationary pressures, and investment in implementing its Ekuseni strategic plan.
This is reflected by its Internal selling price inflation of 7.2%, however, the Group maintained its commitment to supporting customers through lower prices, holding selling prices below CPI Food, which rose from 8.6% in June to 11.3% in August.
The retailer’s gross profit margin increased from 18.2% to 19.4% (R10.0billion (US$542m)) with the pro forma profit before tax in South Africa increasing by 17.1%.
Group pro forma profit before tax rose 22.2%, with a strong performance from TM Supermarkets in Zimbabwe.
This was the first time, Pick n Pay showcased the performance of its different segments on the interim results filling, following the launch of the Ekuseni plan.
In May, the group launched its Ekuseni strategic plan, splitting Pick n Pay supermarkets into two tailored banners: QualiSave, serving lower-to-middle-income customers, and Pick n Pay, serving middle-to-upper-income customers.
Its discounted segment, Boxer South Africa delivered a market-leading performance, with turnover growing by 27.2% to R15 billion (US$813m).
This underlines Boxer’s position as a consumer champion among lower-income customers in search of unbeatable value and service.
While Pick n Pay South Africa (Pick n Pay and QualiSave banners) grew sales by 5.4% to R34.5billion (US$1.87m) with Liquor sales growing by 36.2%.
“We are particularly encouraged by the customer response to stores converted to our redefined customer value proposition (CVP) for Pick n Pay and Pick n Pay QualiSave stores. In total, 41 stores have been upgraded to the new CVP, with plans to increase this to 130 stores by the end of February.
“The upgraded stores are achieving average weekly sales growth of 15% compared to a year ago, alongside noticeable improvements in customer advocacy,” noted the retailer.
The Group launched its new Pick n Pay QualiSave brand on 15 August, and so far, 93 stores have been converted to the QualiSave brand.
The supermarket chain owner also highlighted it’s on track to modernize its operations and reduce costs by R3 billion through Project Future. R315 million (US$17m) of savings were delivered in the first half, enabling Pick n Pay to restrict like-for-like cost growth in South Africa to below like-for-like sales.
Its online sales undertaken through its delivery platform Pick n Pay grew by 82%. Future growth is set to accelerate further following the launch this month of the new Pick n Pay grocery offers on the Mr. D app, with full national coverage to be achieved by end of the year.
The Group’s Rest of Africa segment contributed sales of R2.4 billion (US$130m), an increase of 17.9%, despite challenging conditions in a number of markets. Pro forma profit before tax of R131.9m (US$7.1m) (before the application of hyperinflation accounting) was up 44%, with another good performance from Zimbabwe.