Pick n Pay’s company-owned grocery stores reported weak sales and store closures in the 21 weeks to July 31, as a new management team began to execute a turnaround plan -- discount store chain Boxer traded strongly.
Pick n Pay sales grew 0.1% (- 1.1% like-for-like), with Pick n Pay segment sales increasing only 0.6% (1.7% like-for-like). Sixteen supermarkets were closed, 4 corporate stores and 12 franchise stores. Group sales increased 4.5% for the period (3.7% like-for-like), a trading update said yesterday.
As indication of how badly the group is faring in the local market, its major competitor Shoprite reported 12% growth in revenue for the 52 week period to June 30, and it opened 292 stores in that period. The Spar Group’s South Africa franchise stores grew turnover 7.5% in the six months to March 31.
Pick n Pay’s share price fell by 2.8% to R23.45 late yesterday afternoon, bringing the price 33.5% lower a year and nearly 60% lower than what it was five years ago.
Boxer sales grew a more robust 13.5% (9.2% like-for-like) through the period. This was driven by strong like-for-like performance and new store openings.
Clothing sales in standalone stores was up 10.3%, but grew by only 0.7% on a like-for-like basis due to the late arrival of winter weather as well as port delays. Online sales grew by 63.9%, sustaining the 74.4% online sales growth momentum reported for 2024.
Pick n Pay is in the midst of a recapitalisation and turnaround mainly because its company-owned supermarkets in South Africa, which account for most of its sales, underperformed over the last few years. These are the focus of the turnaround plan, which entails also the listing of Boxer later this year, with the proceeds to be used to reduce group debt, and the revitalisation of the franchise stores.
The group said improved retail disciplines resulted in like-for-like sales for the Pick n Pay segment increase from -0.5% in the second half of the 2024 year, to 3.6% for the period. Pick n Pay Hypermarkets also saw positive sales growth after a long period of underperformance.
A key turnaround indicator for the group was in the Pick n Pay SA segment, where PnP SA Supermarkets sales growth increased from -0.4% in the second half of 2024 to 2% in the 21 week period.
“Against this, like-for-like sales momentum in our South African franchise supermarkets was a disappointing -0.8% across the period,” it said.
The group’s owned supermarkets have rarely outperformed franchise supermarkets in recent years. Pick n Pay said this trend reversal indicated early progress in the turnaround strategy.
The group forecast first half earnings per share and headline earnings a share to decline by more than 20%, an outcome broadly in line with the forecast by CEO Sean Summers at the last year-end, where he had noted that “the situation will get worse” before it improves.
Boxer’s first half trading profit was forecast to show positive growth, while the Pick n Pay segment trading profit was expected to decline. The group said trading expenses were under control because a R259 million employee restructuring cost last year did not recur, and diesel costs were much lower due to the cessation of load shedding.
The R4bn right offer early in August had strengthened the balance sheet, and a focus was now on the second step of the recapitalisation process, the listing of Boxer.
BUSINESS REPORT