Pick n Pay strategized to split its core Pick n Pay offering into two distinct brands and it is gathering momentum, with the retailer saying it has rolled out 134 stores under the new banners with “strong initial results”.
Reporting double-digit profit growth for the 26 weeks ended 28 August, the JSE-listed firm said that so far 93 stores had been rolled out under the QualiSave brand, and 41 stores have been refurbished under the new Pick n Pay and QualiSave Brands. The group upped its interim dividend by 25.3% to 44.85c per share, with its value brand Boxer faring best, though this was partly due to a hit from civil unrest in the prior year.
In May, the retailer announced a move to split the main brand into QualiSave, which is aimed at the lower-to-middle income customers and Pick n Pay, whose focus will be the middle-to-top-end of the market. The new strategy is being rolled out over the next four financial years.
At the same time, the group will significantly expand its successful value brand Boxer as it looks to entrench its position in the middle-to-lower-income segments. Pick n Pay, which flagged its strong results to the market earlier this month in a trading update, said group turnover rose 11.5% to R51.3 billion, while its profit before tax, on a pro-forma basis excluding R145.2 million business interruption insurance proceeds, jumped 22.2% to R588 million. Boxer’s sales jumped 27.2%.
Pick n Pay warned on Tuesday it was unlikely to be able to fully mitigate the effect of issues such as load shedding, with CEO Pieter Boone saying the firm needed to deliver on its cost-savings initiatives in order to continue to fund its store revamp programme. The firm warns that given a low base in the prior year, the first half may not reflect growth for the full year, while 2023 is also set to be a year of investment, and meaningful earnings growth may only return in the 2024 financial year.
This revamp process was already showing clear results, he said in an investor presentation, and these stores had seen a 20% boost in customer transactions, as well as an increase in the average basket size, reinforcing the group’s perception that it was on the right track.
“It’s extremely hard to launch a new brand successfully,” he said, adding that the PnP team did “an excellent job.”
“Importantly, customers are telling us they like these stores,” he said. PnP’s focus was squarely on the customer and improving the value proposition across its various new banners. “Our proposition is simple, never pay more than the Boxer price,” he said.
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“Customers are not shopping more, they are shopping in new and different ways,” he added.
On the same pro forma basis headline earnings per share increased 25.3% to 88.76c. Pro forma earnings also excludes all non-cash hyperinflation gains and losses related to its TM supermarket business in Zimbabwe.
It attributed the turnover growth partly to the “normalisation” of the trading environment after the July 2021 civil unrest and Covid-19 liquor trading restrictions last year, which “negatively impacted the base”.
Pick n Pay estimated normalised turnover grew by 8.2% if these disruptions were excluded.
However, the fallout from the civil unrest continued to reverberate with the group saying it had led to increased insurance and related security costs. At the same time inflationary pressures, as well as investment in its new store strategy, had resulted in additional costs.
FNB portfolio manager Wayne McCurrie said Pick n Pay had reported a “very good” set of “well-guided” results, adding that he expected a lot of the retailers to report similar good news.
“So despite the load shedding and the state of the economy, the retailers are actually doing quite well.”
McCurrie said clearly consumers still had “money somewhere”, and while Pick n Pay would have benefitted from food inflation, it had also delivered strong margin gains. With Karl Gernetzky
Source: News 24
