Retailer Pick n Pay says it plans to invest a further R2.5 billion to deliver on its growth strategy over the next year.
This will include a ‘new space growth strategy’ which focuses on increasing store footprint in the lower-to middle-income communities of South Africa, it said on Wednesday (21 April) in its financial results for the year ended February 2021.
“The group believes that this area of the South African retail market will deliver the greatest growth over the medium- to long-term, driven by an expanding working-age population, urbanisation, and the ongoing formalisation of the informal market.
“The group is under-represented in this area, which provides a strong growth opportunity for its Pick n Pay Value and Boxer supermarkets,” it said.
Aligned with this strategy, Pick n Pay said it has converted 34 franchise stores into company-owned stores this year – including 22 value supermarkets.
This will provide customers with a revitalised, modern and convenient shopping experience and delivering stronger trade performances and higher investment returns off a significantly reduced and tailored range, it said.
Pick will also integrate its various shopping channels into a new website as it prepares to stronger push into the online market, said chief executive, Richard Brasher.
“Our online business responded extremely well to cater for customers in the lockdown, doubling scheduled deliveries and click n collect orders,” he said.
“We are now going to integrate our various online channels by launching PicknPay.com. Customers will in future be able to shop seamlessly with Pick n Pay anytime, anywhere and in whichever way they choose.”
The group’s results show that online sales more than doubled over the year, with a 150% increase in active online customers.
“As a result of consistent levels of availability and good on-time delivery rates, customer satisfaction was up 8.5 percentage points year-on-year,” Pick n Pay said.
It added that its Bottles delivery service is the highest-rated mobile app in its category, ahead of any other online grocery delivery service in South Africa.
“Building on the tremendous momentum achieved during the year, the group purchased the Bottles business in the second half of the financial year to drive integration and innovation across our platform.
“The combination of a strong and established digital platform, dedicated fulfilment centres and in-store picking, alongside a decade of detailed loyalty data, provides Pick n Pay with a strong position from which to continue to drive innovation in e-commerce in South Africa.”
The pandemic has moved forward retailers’ plans for online shopping, with Pick n Pay’s push set to take on Checkers’ Sixty60 service and Woolworths Dash.
Launched in December 2020, Woolworths Dash is a same-day delivery service which is currently available in parts of Gauteng, the Western Cape and KZN.
Checkers launched its Sixty60 app in 2019.The service allows customers to accept delivery within 60 minutes, or alternatively at a time that best suits them.
Users can pay using a credit or chip-enabled debit card and shoppers can track their order throughout delivery with real-time GPS tracking.
Pick n Pay said that it reported strong performance in a trading year that fell almost entirely within the Covid-19 national state of disaster.
Group turnover increased to R93.1 billion (2020: R89.3 billion), while trading profit decreased to R2.7 billion (2020: R2.1 billion). Headline earnings per share (HEPS) decreased to 229.31 cents (2020: 291.90 cents).
The group said that it delivered market-leading sales growth of 10% in core food and groceries in South Africa, underpinned by sustained improvements across the group’s customer offer.
Group earnings were impacted by trading restrictions on non-essential goods and services for parts of the year, which resulted in an estimated R4 billion in lost sales, and R200 million in additional costs related to the group’s operational response to the Covid-19 pandemic.
Despite the impact of lost sales as a result of trading restrictions, group earnings, on a comparable basis and excluding once-off costs, were down only 6.1% year-on-year.
Gross profit increased 4.7% to R18.4 billion, with the gross profit margin rising to 19.8% of turnover.
The board declared a final dividend of 161 cents per share, bringing the total FY21 dividend to 179.74 cents per share, down 16.7% year-on-year in line with comparable headline earnings per share.