Pick n Pay’s share price dropped by more than 13% yesterday on the JSE following the retailer’s posting that it expects to report a loss and that its CEO Pieter Boone would step down.
Boone would be replaced by Pick n Pay’s former CEO Sean Summers.
In its trading statement for the 26 weeks ended August 2023, the retailer said it expects to report a loss of between 98.18 and 79.31 cents per share, a 184% to 204% decline from the 94.34 earnings per share it had last year.
Pick n Pay expects to report a headline loss per share from 149.36 to 129.82 cents, a 233% to 253% decline.
The group said it had experienced a particularly challenging reported period driven by a weak consumer environment, load-shedding costs, and heightened competitive intensity.
“Continued strong sales momentum in the Ekuseni growth drivers of Boxer, Online, and Clothing was offset by muted sales growth in Pick n Pay SA supermarkets, gross profit margin pressure, and load-shedding cost pressures.
“While Boxer managed to withstand the combined impact of these pressures, the impact on Pick n Pay SA supermarkets was significant,” it said.
The retailer said there had been a pleasing uptick in South African and group sales momentum over the latter six weeks of the period versus the initial part of the period, 20 weeks to July 16, as previously reported.
“Group sales for H1 FY24 increased 5.4%. South Africa sales growth for the period was 5.1% (1.8% like-for-like), while the group’s Rest of Africa segment sales increased 14.4% (12.2% on a constant currency basis),” it said.
Pick n Pay said the South African sales for the reported period were 0.3% (0.8% like-for-like) as lower levels of load shedding in the latter part of the period allowed Pick n Pay to re-intensify its promotional programme.
“Consequently, sales growth for the latter six weeks of the period was 2.4% versus the -0.3% previously reported for the first 20 weeks.
“Boxer SA grew H1 FY24 sales 16.1% (4.2% like-for-like), as Boxer extended the strong sales momentum shown in the earlier part of the period,” it said.
Clothing sales in stand-alone stores grew 13.8%, while group liquor sales grew 9.6%. Online sales growth for the period grew 76.3%, driven primarily by growth in on-demand platforms Pick n Pay asap! and Mr D, it said.
Incremental abnormal costs for the first half of the 2024 financial year were expected to be about R565 million, consisting of diesel costs to run generators of R396m and net incremental energy costs of R190m; R116m duplication of supply chain costs during the Longmeadow/Eastport handover; R259m of employee restructuring costs, primarily due to a voluntary severance programme and junior store management restructuring that were concluded in the period.
“The group expects to realise about R300m of annualised ongoing cost savings from these Project Future initiatives,” it said.
Pick n Pay’s management said they expected to face continued headwinds in the latter half of the year, but earnings outlook for the second half might be materially stronger, driven by more supportive earnings seasonality, lower net incremental energy cost growth, a non-repeat of supply chain cost duplication, and efficiency gains from Project Future initiatives.
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