Pick n Pay posts ‘disappointing’ results, bets on Summers for turnaround

Pick n Pay reported disappointing results for the first half of the 2024 financial year, as load-shedding and increased competition weighed on the retailer’s operations.

Pick n Pay released its results for the 26 weeks ended 27 August 2023 today, which revealed a poor first-half performance.

Group turnover increased 5.4%, with a substantial contribution from Boxer SA (16.1%). Other income grew 7.3%. 

However, the retailer’s trading profit margin declined to 0.1% from 2.4%. Trading profit declined to R31.8 million from R1.25 billion the previous year – a 97.5% decrease.

This is mainly because trading expenses increased 13.7%, driven by energy and employee restructuring costs. 

The retailer spent R396 million on diesel to run generators and keep stores open and R259 million on employee restructuring costs during the period. 

This impacted the retailer’s expense growth and constrained Pick n Pay’s ability to respond to increased promotional activity in the market, the company said.

“The Group delivered a disappointing result in a period heavily impacted by load-shedding and increased competitive intensity,” Pick n Pay said.

The retailer’s headline earnings per share (HEPS) swung from 97.73 cents per share to a headline loss per share of 138.24 cents – a 241.5% decrease.

The company said its loss before tax was further impacted by a 47.3% increase in net finance charges – bank and lease interest – to R913.1 million, resulting in a pro forma loss before tax and capital items of R837.2 million from a profit of R588.0 million the previous period.

The R31.8 million trading profit for the period would have been R596.8 million if one excluded the incremental abnormal costs like load-shedding and employee restructuring costs.

“Notwithstanding the difficult trading environment and the incremental abnormal costs, the board was disappointed with the group’s performance, particularly in Pick n Pay supermarkets, and took critical action,” the retailer said.

“As a consequence, the board decided on new leadership, appointing Sean Summers, a Pick n Pay veteran who previously led the Group through a highly successful period, as CEO from 30 September 2023.”

The retailer recognised that the turnaround will be a multi-year journey but said Summers’ immediate focus is to return the core Pick n Pay supermarket business to growth and profitability.

“Given that Mr Summers stayed in close touch with the group prior to his appointment, he will hit the ground running and make an immediate impact.”

Summers said, “This is an exceptional company with a much-loved brand and a rich heritage.”

“We have a lot of work to do, and I have received strong support from our people. They want to see Pick n Pay succeed, and my task will be to see that we work hard on the basics and improve significantly both on customer service and on execution in our supermarkets.”

However, the retailer said management expects continued headwinds in the latter half of the year.

While it anticipates the H2 FY24 earnings outlook to be stronger than H1 FY24, they will be below H2 FY23. 

The retailer, therefore, advised shareholders that it expects earnings per share and HEPS for the full-year FY24 to decrease by more than 20% compared to the full-year FY23.

The company did not declare a dividend.