Pick n Pay’s shares took an almost 9% nose dive yesterday as it reported a decline in sales for the 20 weeks ended July 16, 2022 as it cut promotional spending amid high operating cost pressures due to load shedding.
The shares fell to an intraday low of R34.80 and have decreased by 38.33% in the past six months.
In its trading statement, released yesterday, the retailer said Pick n Pay SA sales declined 0.3%, 0.0% like-for-like. The slower sales momentum relative to the 3.2% reported for the second half of the 2023 financial year, was a consequence of reduced promotional activity during the period as Pick n Pay managed the impact of extraordinary operating cost pressures caused by elevated load shedding.
It said total diesel costs to run generators for the four-month period of March to June was R300 million and estimated net incremental energy costs were approximately R165m, potentially annualising to R250m for the first half of the 2024 financial year.
Its sales covering the 20-week period from February 27, 2023, to July 16, 2023, increased by 4.8%.
Pick n Pay flagged that South Africa sales growth for this period was 4.4%, 0.9% like-for-like, while the group's Rest of Africa segment sales increased 15.9%, 12.0% on a constant currency basis.
“Sales performance within Pick n Pay SA was muted as the group strove to contain the margin impact of load shedding costs,” it said.
Clothing sales in stand-alone stores grew 10.9%, while group liquor sales for the period grew 9.8%. Online sales growth for the period was 75.3%, sustaining the strong online sales growth momentum reported for the 2023 financial year.
Pick n Pay said its South Africa sales growth for the period was constrained by a slow performance from Pick n Pay, while Boxer sales accelerated moderately from the 14.4% reported for the second half of the 2023 financial year.
“Boxer SA sales growth was 15.4%, 3.0% like-for-like. Boxer continued to deliver strong sales growth, despite the high base,” it said.
According to the group, pro forma earnings exclude all non-cash hyperinflation gains and losses related to the group’s TM business in Zimbabwe, and in the 2023 financial year excluded R145.2m, R104.5m net of tax, of business interruption insurance proceeds received and accounted for in financial year 20223, but relating to financial year 2022.
“The constant currency sales growth information contained in this announcement has been presented to illustrate the impact of changes in the group’s major foreign currencies – namely the Zambian kwacha and the Botswana pula – on the sales growth of its Rest of Africa segment,” it said.
Looking ahead, Pick n Pay said the management expected the second half of the 2024 financial year earnings outlook to be materially stronger than the first half of 2024, as a result of more supportive earnings seasonality, net incremental energy cost growth to be relatively low, given the high second half of 2024 base, non-repeat of supply chain cost duplication, and efficiency gains from the first half of 2024 Project Future initiatives beginning to contribute.
Market analyst Simon Brown (@SimonPB) tweeted, “Pick n Pay SA sales declined 0.3% (0.0% like-for-like) while ‘internal selling price inflation’ was 9.5%, so they went backwards at a fairly alarming rate.”
Market analyst The Finance Ghost (@FinanceGhost) tweeted, “Pick n Pay will report a loss for the interim period. Big once-offs, but the reality is that load shedding is smashing any retailers that aren’t efficient. Pick n Pay’s strategic improvements are highly necessary, but they took too long to happen. The core business is hurting.”
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