Pick n Pay provides earnings update

Date : 11 August 2020

Jon Wright

Head of Insight - RA EMEA

South Africa-based Pick n Pay has published an earnings update, covering the 26 weeks to 30 August, which it says will ‘reflect the considerable impact of the crisis to date’. The retailer said the effect of three factors were expected to see it report a fall of more than 50% in its headline earnings per share.

Mixed update highlights progress…

In the update Pick n Pay highlighted how ‘consumer spending on core food and groceries has remained resilient over the past four months, despite the physical disruption and the substantial financial pressure that the COVID-19 pandemic had placed on most households’. Against this backdrop, the retailer noted how it had been able, despite the disruptions, to make progress against its long-term plans, which it launched in January 2020 under the name Project Future.

…And discusses rising costs and challenges

Despite the positive steps and sales outlook, Pick n Pay highlighted the impact of three factors on its profitability. First, the retailer highlighted the restrictions put on all retailers by the government, as it looked to slow the spread of COVID-19, which prohibited the sale of key products, including alcohol, tobacco, clothing, general merchandise and hot foods, which make up about 20% of sales. Pick n Pay also said the ranges provided ‘ higher gross profit margins relative to basic food and grocery lines’.

Secondly, it said it had faced higher costs during the COVID-19 crisis period. It invested heavily in initiatives to protect staff and shoppers alike. In addition to these costs the retailer also paid its front-line staff an appreciation bonus of ZAR1,000 (US$ ) as ‘recognition of their service during very difficult circumstances in the early stages of the crisis’.

Finally, the retailer launched a voluntary severance programme ‘to ensure that further improvements in the efficiency and productivity in Pick n Pay store and support office functions were translated into permanent employee cost savings’. Colleagues who took up the offer were given ‘1.5 weeks of pay per completed year of service, plus four weeks of notice pay, with more than 1,400 colleagues choosing to do so.

Pick n Pay clothing launches online…

As with markets globally, ecommerce has enjoyed a growing share of sales in South Africa during the pandemic. To benefit from this growing interest, Pick n Pay Clothing has launched a standalone site, which is separate from the retailer’s grocery and wider general merchandise range. Although it is a separate site, shoppers will be able to use their existing log in details, which will make it easier and quicker to use the site.

Shoppers can buy from the retailer’s full clothing range for nationwide distribution in three to five working days, with delivery costing ZAR60 (US$3.40). Shoppers can return products to any of Pick n Pay’s hypermarkets, supermarkets, or clothing stores. They will also be able to benefit from the same offers available in-store and the chance to collect Smart Shopper points on their online purchases too. The retailer said a click and collect option would be added in the medium term.

…And collaborates with young, local designers

In a separate announcement, Pick n Pay Clothing said it was working with local designers to provide ‘limited ranges of exclusive collections… [to make] designer clothing more accessible and affordable’. Prices for the ranges would be between ZAR280 (US$15.80) and ZAR400 (US$22.60). The company said its first collaboration would be with Julia Buchanan and would be available under the Pick n Pay Clothing x JULIA name. The initial range will be available at 50 Pick n Pay Clothing stores and online and would only be available for as long as stocks last.

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