Resilient performance in unprecedented times
[Cape Town, 20 October 2021] Pick n Pay today published its financial results for the six months ended 29 August 2021.
Group comparable earnings per share increased 90.9% year-on-year, a resilient performance in a period which was severely disrupted by the devastating civil unrest in July, and significant restrictions on the sale of alcohol.
The Group recorded sales growth of 4.1% over the period, to R46.0 billion. The civil unrest resulted in an estimated R930 million in lost sales. 212 stores were damaged by looting and destruction. Pick n Pay's two largest distribution centres in KwaZulu-Natal were looted of all stock, and suffered considerable damage to infrastructure. At the height of the unrest, the Group closed an additional 551 stores to protect staff and customers. The government's liquor restrictions resulted in an estimated R800 million in lost sales, and a significant impact on Group earnings, over the period.
As a result of the trading disruptions over the period, most notably the civil unrest in July, gross profit decreased 3.4% to R8.4 billion, with the gross profit margin lower at 18.2% of turnover.
However, comparable profit before tax rose 86.3% year-on-year, against a highly disrupted base. Comparable headline earnings per share increased 90.9%, demonstrating that the positive momentum reported in the second half of the FY21 financial year has been maintained.
The Group's result reflected strong performances by its Boxer and Clothing businesses, pleasing momentum in omnichannel, and effective management of working capital and capital investment.
Further progress was also achieved in the turnaround of the core Pick n Pay division. Pick n Pay's modernisation programme, Project Future, is on track to deliver its targeted R1 billion reduction in costs over two years.
Cost savings have enabled the Group to give customers lower prices and deeper promotions – particularly on essential food and grocery items – at a difficult time for many families. The Group's internal selling price inflation was contained at 3.6% year-on-year, against CPI food inflation of 6.5%. Customers are noticing the difference, with independent consumer surveys reporting a pleasing improvement in Pick n Pay's price perception.
- Superb recovery across the organisation from the destruction and looting in July
- At the height of the violence 551 stores were closed to protect customers and staff, and a further 212 PnP and Boxer stores were damaged by looting and destruction. Two PnP DCs in KZN were temporarily rendered inoperable by the unrest
- Rapid progress in rebuilding and reopening: Pick n Pay's DCs in KZN restored within two weeks, and only 45 stores now remain closed
- Over 1,200 trucks were diverted from as far away as Cape Town to deliver over 1.2 million cases of essential food and groceries to KZN in the immediate days after the violence
- Above market sales performances from Boxer and Pick n Pay Value stores in the less-affluent market
- Strong sales growth from 24 modernised Select Stores, introducing 300 new lines with focus on fresh, convenience and plant-based meal solutions
- Savings from greater efficiency translated into lower prices for customers: internal selling price inflation only 3.6% compared to CPI Food of 6.5%
- Boxer own brand sales grew by 26% year-on-year, reaching a sales penetration of 28% in participating categories
- Relaunch of asap! on-demand offer has delivered 200% growth in on-demand online sales since launch
- Pick n Pay Clothing extended market share gains, delivering 26.1% sales growth year-on-year
- Smart Shopper goes from strength to strength - recognised as South Africa's most used loyalty programme, with penetration now close to 80% of Pick n Pay sales
- Greater efficiency in supply chain delivered further improvements in underlying gross profit margin
- 64 new stores across all formats
- Feed the Nation campaign has raised over R150 million in hunger relief, and played a key role in supporting communities affected by the civil unrest
- Interim dividend up 91% year-on-year in line with increase in comparable headline earnings per share
Commenting on the result, CEO Pieter Boone said:
I am exceptionally proud of our Pick n Pay and Boxer teams for their leadership in very difficult and unforeseen circumstances. The way you responded to the horrific events in July was inspiring. It confirms again that Pick n Pay and Boxer are great organisations, with great people at their heart. Winning through people remains at the heart of my strategy.
Our sales were badly affected by the civil unrest, and also by the government's liquor restrictions. I am encouraged that – once you normalise our performance to strip out these effects – we maintained our underlying positive momentum across the Group.
When I spoke briefly at the full-year results in April, I highlighted the importance of future growth through Boxer, clothing and omnichannel. I am very pleased that all three divisions put in winning performances in this half. Boxer is the fastest growing grocery retailer in South Africa, and is gaining market share, particularly in own brand products. Our clothing division grew sales by 26.1% year-on-year, and is also growing ahead of the market. In omnichannel, we relaunched our on-demand service as asap! in July. Since then, it has delivered growth of over 200% year-on-year, with a significant increase in new and returning customers.
Our Pick n Pay stores remain the largest part of our Group. Our franchise partners continue to set the example, with the exceptional focus on customers, despite many being badly affected by the rioting in July. We have made progress in our company-owned stores, in particular ensuring that our savings through Project Future have been invested in lower prices for customers.
But I want to see much more from Pick n Pay. Through our Select stores plan, we will be accelerating innovation in healthy, convenient and value-added products at the top of the market. We have trialled the plan in a number of stores, and are very excited by the growth we have seen. We will also be simplifying decision-making across Pick n Pay, so we can tailor our offer better to the needs of local customers.
Pick n Pay still needs to get leaner, faster, and more efficient. That is why I have announced today a new ambition under our Project Future to deliver R3 billion in additional savings over the next three financial years. We will measure every cent of savings. But Project Future is about more than just saving money. It is about our determination to modernise and become more adaptable, so that we can serve our loyal and valued customers in ever-better ways.
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