Supermarket group Pick n Pay (PnP) says the July unrest cost it R930 million in lost sales. The company is the first food retailer to report on the effect the July unrest had on performance.
Pick n Pay’s two largest distribution centres in KwaZulu-Natal (KZN) and 212 stores – which amount to 10% of the group’s estate – were damaged by the looting and destruction that overwhelmed KZN and Gauteng following the arrest of former president Jacob Zuma over two months ago.
The group said it lost a further R800 million as a result of government’s restrictions on the trade of alcohol, bringing the overall revenue loss as a result of trading disruptions for the year to about R1.7 billion.
However, insurance will cover the majority of the group’s losses, with about R600 million already paid out.
Revenue losses had a significant impact on the group’s earnings for the six months ending August 29, 2021. PnP recorded subdued growth in sales of 4.1% to R46 billion and a 3.4% decrease in gross profit to R8.4 billion, lowering its gross profit margin to 18.2% of turnover.
“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,” Pick n Pay’s recently-appointed CEO Pieter Boone said in a statement.
Balance sheet undeterred
Despite the revenue it lost as a result of disruptions to trade, the group reported a 40% increase in headline earnings per share (Heps) in the period to 61.28 cents (2020: 43.78 cents). Comparable headline earnings per share – which exclude the full impact of hyperinflation accounting in Zimbabwe and all items of a capital nature – rose by 90.9% to 70.85 cents (2020: 37.12 cents).
This was mainly underpinned by a strong performance by its Boxer and Clothing businesses, pleasing momentum in omnichannel offers and effective management of working capital and capital investment.
Boxer – the group’s discount supermarket offering – saw a 26% year-on-year increase in own brand sales helping it reach a sales penetration of 28% in participating categories.
“Boxer is the fastest-growing grocery retailer in South Africa, and is gaining market share, particularly in own brand products,” Boone said.
Pick n Pay Clothing reportedly extended market share gains and delivered a growth in sales of 26.1% year-on-year. Boone said it is growing ahead of the market.
The group’s online on-demand delivering service – asap! – has grown by 200% since it was launched in July.
The group announced intentions to open 64 new stores across all its store formats and to introduce 300 new lines focused on fresh, convenient and plant-based meal options.
The group says it is on track to deliver its modernisation programme ‘Project Future’ target of R1 billion in cost savings over two years.
Its new target is to save R3 billion in costs 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,” Boone added.
Pick n Pay will issue an interim dividend of 35.80 cents per share – a 91% increase compared with the previous period.