Pick n Pay’s tale of two differing quarters earns the retailer 4.1% rise in half year revenue

SOUTH AFRICA – South African retailer Pick n Pay has published its financial results for the six months ended 29 August 2021, with the group reporting solid results despite the harsh operating environment exhibited during the period.

According to the company, its comparable headline earnings per share increased 90.9% year-on-year, from a low base of 37.12 cents to 70.85 cents.

This is a resilient performance in a period marked by unprecedented civil disorder in South Africa and the resumption of government restrictions on alcohol sales in response to the third wave of the Covid-19 pandemic.

During the period under review, the supermarket chain owner entered the financial year with positive trading momentum, and delivered a strong first quarter result, with sales up 9.0% against the same period last year.

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However, sales were severely impacted in the second quarter by the damage and disruption caused by the civil unrest – with looting, damage and destruction in KwaZulu-Natal and parts of Gauteng in July – and the re-introduction of government restrictions on the sale of alcohol.

As a result, the group’s second quarter sales growth fell to -0.7%, delivering a turnover growth of 4.1% over the full first half to R46 billion (US$3.15 billion).

The Group estimates that the trading disruptions resulted in lost sales of approximately R1.7 billion (US$116m) i.e., R930 million (US$63m) in respect of the civil unrest and R800 million (US$54.8m) as a result of liquor restrictions.

Speaking during the financial results presentation, Pick n Pay chairperson Gareth Ackerman said the government’s reliance on restricting alcohol sales as part of its Covid-19 response had been immensely damaging.

“There is a wealth of evidence to show it has little or no positive impact as a public health measure. But it has an immensely negative impact on jobs, on the economy, on confidence in our Covid response, and of course on the performance of businesses like ours.

“Our concern is that the state of disaster is being used by elements of government to address liquor policy issues without resorting to the constitutional processes,” said Ackerman.

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He said businesses and the government depended on each other and called for transparency. “We must avoid those cases where ideology, poor liaison, lack of transparency or intransigence damage our economy, and erode trust,” he said.

Adding back the estimate of current period trade lost, management estimates that the group would have delivered sales of R47.7 billion (US$3.27m) during this half, up 8.0% on the same period last year.

Pick n Pay stipulates turn-around strategy

Meanwhile, Pick n Pay attributes the strong performances to its Boxer, Pick n Pay Value and Clothing businesses, benefitting from effective management of working capital, targeted capital investment, and pleasing momentum in its omni-channel offer.

The group recognises that there is more progress to be made in its turnaround.

The company is accelerating innovation – including in healthier, more convenient and more value-added products in the most affluent segment of the market through its Select stores plan.

This is a space historically dominated by Woolworths, and more recently, has been targeted by Checkers’ FreshX stores.

“I want to see much more from Pick n Pay,” said Chief executive Pieter Boone. “Through our Select stores plan, we will be accelerating innovation in healthy, convenient and value-added products at the top of the market.

“We have trialled the plan in a number of stores and are very excited by the growth we have seen. We will also be simplifying decision-making across Pick n Pay so that we can tailor our offer better to the needs of local customers.”

Pick n Pay said that it has already modernised 24 Pick n Pay Select stores in the period, optimising their core food and grocery range and introducing 300 new lines, with a focus on: High-quality fresh produce; Added-convenience; Plant-based meal solutions; and Unique grocery lines.

To accelerate its turnaround, Pick n Pay is responding by setting a stretching new Project Future to save a further R3 billion (US$205m) over the next three years in its operations.

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