Pick n Pay: H1 results show growth in South Africa

Date : 23 October 2020

Jon Wright

Head of Insight - RA EMEA

Pick n Pay has released interim results for the 26 weeks ending 30 August 2020.

Turnover rises in H1…

Pick n Pay reported comparable turnover rose 2.6% to ZAR44.2 bn (US$2.7 bn) at a total company level, with like-for-like sales rising by 1.0%. Its performance in South Africa drove its results, with comparable turnover in its home market rising by 3.4% to ZAR42.7 bn (US$2.6 bn), with like-for-like sales rising by 1.7%. It estimated the impact from lockdown restrictions had affected up to 20% of its revenue ‘at different stages of the lockdown’ and led to lost sales worth ZAR2.8 bn (US$171.9m).

…as trading profit falls

However, additional operating and one-off costs incurred because of the COVID-19 pandemic saw its trading profit fall by 25.4% to ZAR885.6m (US$54.3m). Pick n Pay said it generated ZAR150m (US$9.2m) of ‘additional operating costs directly related to the Covid-19 pandemic, and ZAR100m (US$6.1m) of one-off costs’.

Core ranges and operations drove performance

Pick n Pay said core retail sales, which it defined as ‘including food, groceries, and general merchandise, but excluding liquor, clothing, and tobacco’, enjoyed sales growth of 8.7% year-on-year and by 6.4% in like-for-like terms. In its home market it saw growth of 9.9% growth, 7.6% in like-for-like terms, which the company said ‘represents 4.2%... volume growth in the Group’s core food and grocery offer in South Africa’. The company continued to expand during H1, opening 42 new stores, despite the disruption brought about by the lockdown.

Online sales rise strongly

With a long-standing presence in the online channel, Pick n Pay benefited strongly from shoppers switching to buying online. The retailer said ‘online sales doubled over the period, with a 200% increase in active online customers’. Despite the strong increase in shopper numbers Pick n Pay stressed how its operations had remained efficient throughout the timeframe, with ‘product availability (order fulfilment rates) of 94% and on-time delivery rates of 98%’. To support this growth the retailer expanded its fulfilment capacity, with the service available across the country, with two distribution centres dedicated to online orders and from more than 150 supermarkets.

While Rest of Africa segment struggles

Continuing the recent trend seen by it and other regional retailers, Pick n Pay’s operations outside its home market struggled. In H1 2020, its stores outside South Africa generated sales of ZAR2.0 bn (US$122.8m), a fall of 7.3% in constant currency terms.

The retailer noted the ‘increasingly difficult trading conditions in southern Africa, combined with the impact of Covid-19 and differing government responses across the six countries [it operates in]’. In these markets Pick n Pay said it had seen a ‘substantial decline in customer transactions and an increase in basket sizes, as customers limited their shopping trips in the pandemic’. Its performance was also impacted by stock shortages, which were driven by market’s reliance on imported stock.

Foundations in place for future growth

Despite the challenging operating environment and the expected impact of an economic downturn to come, Pick n Pay stressed its strategic focus would remain in place. It said it would continue ‘to build a simple and more effective business, with sustained cost savings invested back into our customer offer’.

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