Tough economy a good test for a solid retailer - Pick n Pay CEO
Pick n Pay's interim results showed that the retailer delivered its strongest six-month trade performance, measured by volume, in five years.
In a challenging trading environment, it recorded a 6.4% increase in turnover to R41.2 billion from R38.8bn in the corresponding period last year. Like-for-like turnover rose by 3.8%.
The company said it benefited from decisive action taken last year to reduce operating costs, increase productivity, and invest more in the customer.
Pick n Pay held its internal inflation at 0.3%, far lower than the 3.5% food inflation reported by StatsSA in its consumer price index (CPI). The company reduced prices across 2,500 everyday grocery lines, and delivered a new 'Fresh Promise' on its fresh meat and produce offer, which delivered double-digit growth in key fresh categories over the period.
The retailer introduced over 630 own brand products in the period, with Pick n Pay own brand grocery participation now at 21% across relevant categories.
“We’ve acted boldly and taken tough decisions. We’re leaner, fitter and buying better. We’ve improved our cash flow and reduced our long-term gearing to almost zero, both indicators of a strong performance in a tough economy," CEO Richard Brasher commented.
Pick n Pay recorded 25% growth from its online distribution centres and a 30% increase in online customer registrations. Smart Shoppers were offered R2.4 billion in personalised discounts, with the number of customer redemptions more than double year-on-year, while the Pick n Pay Store account now has 100,000 active customers.
“We are growing and improving our estate, including in formats and services supplementary to our core supermarket offer. Our online and value-added services are performing particularly well," Brasher said.
Outside of South Africa, the Group’s operations contributed R2.3 billion of segmental revenue this year, up 0.4%. Without the impact of currency weakness, segmental revenue was up 3.9% in constant currency terms, with like-for-like growth of 0.6%. Profit before tax was up 7.3% to R136.1 million, driven by “outstanding performance” from the Group’s associate in Zimbabwe, TM Supermarkets, which recorded turnover growth in local currency of 30.4%.
Zambia operations, however, suffered from “a tough trading environment, characterised by a constrained consumer, intense retail competition, import restrictions and selling price deflation across broad product categories.”
60 new stores
The group opened 60 new stores during the first 26 weeks of its 2019 financial year, with a focus on smaller neighbourhood convenience stores, standalone clothing stores and liquor stores. It closed 13 underperforming stores during the period.
Brasher said that Boxer also reported an outstanding performance with double-digit customer growth. "They’re delivering exceptional deals on basic lines, and giving customers confidence that they do not need to shop around for the best value," he said.
"A tough economy is a good test for a solid retailer. Pick n Pay has improved its offer, localised our product offerings and found traction with customers across all sections of the economy. This has been achieved without any sacrifice in earnings or profit margin.
“We are in good shape. We have demonstrated an improved ability to compete effectively in a low growth environment and we look forward to building on this momentum in the second half of the year,” Brasher said.