Checkers crushes Pick n Pay

Over the last two years, Checkers has overtaken Pick n Pay in revenue. It tells the tale of a great retailer crushing a mediocre one.

On Tuesday, Checkers owner Shoprite provided the market with an operational update for the 52 weeks, which ended on 30 June 2024.

Shoprite revealed that the group increased the total sale of merchandise by 12.0% to approximately R240.7 billion.

The retail group added 292 stores during the period, including 73 OK Franchise stores, to 3,639 stores from continuing operations.

In South Africa, the Shoprite group opened a net of 201 stores during the year to bring its total number of stores in the country to 2,322.

Of these net new store openings, 20 were Shoprite, 22 Usave, 25 Checkers, and 71 LiquorShop stores. The remaining 63 were new format, adjacent category specialist stores

The group’s core business, Supermarkets RSA, achieved sales growth of 12.3%, contributing 81.0% to group sales.

Like-for-like sales growth for the period measured 6.3%, noting that the stores acquired from Massmart were included in like-for-like sales growth only for the second half period.

Checkers and Checkers Hyper reported sales growth of 12.3%. Checkers Sixty60’s sales increased by 58.1%.

Eskom’s load-shedding reprieve from March to July was seen in the latest Shoprite results.

The cost of diesel to power generators during load-shedding across Shoprite’s South African stores for the year amounted to R754 million.

The retailer spent R500 million on diesel in the first half of the financial year. It reduced to R254 in the second half, which Eskom cut load-shedding.

“This decrease in diesel costs should be considered in light of a commensurate increase in electricity usage,” Shoprite said.

“As a result, we anticipate the percentage increase in the Group’s water and electricity expense for the year should be in the mid- to low single digits.”

Checkers crushed Pick n Pay

An interesting comparison is the performance of Checkers in comparison with its biggest competitor, Pick n Pay.

In May, Pick n Pay released its results for the year that ended 25 February 2024. They were disastrous.

Like-for-like revenue only grew by 3%, much lower than inflation, and trading profit fell 87% from R3.05 billion to R385 million.

Its net profit was significantly impacted by a R2.4 billion interest expense due to rising debt and an R2.8 billion impairment loss on assets.

These factors contributed to Pick n Pay’s R3.2 billion net loss, the worst in the retailer’s 57-year history.

Apart from its poor operational performance, Pick n Pay also took on more debt than it could handle.

Interest-bearing liabilities, including lease liabilities, borrowings and bank overdrafts, amounted to R30.8 billion.

This represents an R7.54 billion increase in interest-bearing liabilities compared to the previous year’s R23.3 billion.

The rapid rise in debt meant Pick n Pay became technically insolvent. To strengthen its balance sheet, it had to raise R4 billion from shareholders in a rights issue.

It is also planning to list Boxer separately on the JSE, with an initial public offering (IPO) set for later in 2024.

Pick n Pay stores as a segment reported an operating loss of R1.5 billion for the 2024 financial year. That is more than a 200% drop from the R1.4 billion profit in 2023.

As a result of this poor performance, Pick n Pay auditors impaired many stores, creating an impairment loss, also known as an asset value write-down, of R2.8 billion.

To fix the problem, 112 of these stores will either be closed or converted to Boxer franchised stores.

A comparison between Checkers and Pick n Pay’s performance over the last two years clearly shows the difference in performance.

Checkers has shown excellent growth, overtaking Pick n Pay in revenue for the first time over the last financial year.