Pick n Pay Stores will more than double the pace of low-cost food and clothing store openings over the next year as living costs rise and cash-strapped shoppers turn to cheaper alternatives.
The South African grocer plans to open 61 of its discount Boxer food stores in the fiscal year through August, from 36 in the previous 12 months. It also has 67 new casual wear-focused clothing outlets confirmed for the year, from 27 in fiscal 2022.
“We’ve seen inflation rising to levels that we haven’t been familiar with for some years,” David North, Pick n Pay’s executive for strategy, said in an interview Tuesday. “We think there’s a lot of room to give more customers access” to these brands.
Annual inflation is at a level last seen during the global financial crisis and has averaged 6.6% this year, compared with 4.2% in the first eight months of 2021.
The Cape Town-based company expects the next financial period to be an investment year, with “meaningful earnings growth” only forecast from fiscal 2024, it said in an earnings statement.
The shares dropped as much as 8.4% in Johannesburg trading, the biggest intraday decline in two and a half years. They traded 7.8% lower as of 10:53 a.m. local time, compared to a 0.5% drop in the benchmark FTSE/JSE Personal Care, Drug and Grocery Stores Index.
The company’s three-year target of R3 billion of savings is on track, and while inflationary cost pressures and increasing power cuts will affect the next six months, these challenges shouldn’t derail the cost-cutting and modernization plan, North said.