Positive Pick n Pay performance with good progress on Ekuseni strategic PLAN
Pick n Pay published its financial results for the six months ended 28 August 2022.
The Group delivered a positive performance in its first trading period under its new Ekuseni strategic plan, launched in May 2022. Group turnover was up 11.5% year-on-year. Even when normalising for disruptions in the base period – due to the civil unrest, and Covid-19 liquor restrictions last year – Group turnover increased by an encouraging 8.2%.
Internal selling price inflation of 7.2% for the period reflects a highly inflationary environment, particularly towards the end of the reporting period. 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 Group’s gross profit margin increased from 18.2% to 19.4% (R10.0billion). However, the gross profit margin in the base period was depressed by the cost and disruption of the July 2021 riots. Taking this into account, the gross profit margin contracted on a normalised basis by 0.6% pts - reflecting planned investments in lower prices, and significant increases in energy costs.
Pro forma profit before tax in South Africa increased 17.1%, despite increased insurance and security costs following the July 2021 riots, inflationary pressures, and planned costs associated with implementing the Ekuseni plan. Group pro forma profit before tax rose 22.2%, with a strong performance from TM Supermarkets in Zimbabwe
The Group has for the first time segmented the sales growth achieved by Boxer and by Pick n Pay respectively in South Africa. Boxer South Africa delivered a market-leading performance, with turnover growing by 27.2% to R15 billion. This underlines Boxer’s position as a consumer champion among lower-income customers in search of unbeatable value and service. The Group is on track to double Boxer sales over the four years of its Ekuseni plan.
Pick n Pay South Africa (Pick n Pay and QualiSave banners) grew sales 5.4% to R34.5billion. This was a respectable performance in a tough market. 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. 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 Group is on track to modernise its operations and reduce costs by R3 billion through Project Future. R315 million 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. A key development was the signing of a multiskilling agreement with its main labour union, SACCAWU, which will enable Pick n Pay to deploy store colleagues in a more flexible way, improving productivity and customer service.
Online sales grew 82%, primarily through Pick n Pay asap!. Future growth is set to accelerate further following the launch this month of the new Pick n Pay grocery offer on the Mr D app, with full national coverage to be achieved by end of the year.
Pick n Pay Clothing continue to gain market share with 14.8% sales growth, opening 28 new stand-alone stores. Group liquor sales grew 36.2%. 17 new liquor stores were added, taking the total to 646 stores.
The Rest of Africa segment contributed sales of R2.4 billion, an increase of 17.9%, despite challenging conditions in a number of markets. Pro forma profit before tax of R131.9m (before the application of hyperinflation accounting) was up 44%, with another good performance from Zimbabwe.
An interim dividend of 44.85 cents per share was declared, up 25.3% on last year in line with pro forma HEPS.
Pick n Pay CEO Pieter Boone said:
I am very pleased with the progress achieved across Pick n Pay and Boxer over the past six months. We have supported customers through an exceptionally difficult time, delivering lower prices and better value across Pick n Pay and Boxer.
The launch of our Ekuseni strategic plan in May was a landmark moment for the Group. I am proud of what our teams have achieved in the five months since that launch. We have unveiled a totally new retail banner in Pick n Pay QualiSave – dedicated to customers who want Pick n Pay quality at exceptional prices. We are rejuvenating our Pick n Pay stores at pace, and the sales growth and customer feedback in these stores is very encouraging.
We have also launched our new Pick n Pay online grocery offer on Mr D. It will be the best offer in the market, and we will roll it out nationally by the end of the year.
Building on my commitment to greater transparency, we have for the very first time reported the turnover growth in our Boxer and Pick n Pay businesses separately. Stakeholders can now see why we are so excited about the performance and potential of Boxer. We are opening new Boxer stores rapidly and will accelerate our progress in the coming months.
We made it clear when launching the Ekuseni plan that FY23 would be an investment year, with costs in implementing the plan, and investing to get the right prices for consumers. The next six months will also continue to see strong headwinds, including inflationary pressures, rising energy prices, and loadshedding. However, I am incredibly energised by the spirit and commitment of our teams. We are delivering for our customers, and there is plenty more to come from the Pick n Pay Group.