Massive loss for Pick n Pay

 ·27 May 2024

Pick n Pay has delivered a R3 billion loss for the year ended 25 February 2024 (FY24), primarily due to the poor performance of its Pick n Pay grocery stores.

The group said that this poor performance undermined the strong performance of the Boxer business.

The result was also impacted by increased interest charges due to increased gearing and a R2.8 billion non-cash store asset impairment in the group’s Pick n Pay grocery business.

However, group turnover did jump by 5.4%, driven by strong growth from Boxer (17.3%) and Pick n Pay Clothing standalone stores (17.0%).

However, gross profit margin declined by 1.5% to 18.1%, while gross profit in Rand terms declined 3.1% year-on-year.

Trading profit declined by 87.4% to R385 million, highlighting Pick n Pay grocery’s R1.5 billion trading loss (FY23: R1.3 billion profit) and Boxer’s R1.9 billion trading profit (FY23: R1.8 billion profit).

“The Pick n Pay trading loss was primarily driven by flat (+0.3%) Pick n Pay sales, trading expense growth exceeding sales growth, and gross profit margin contraction in that business,” said the group.

“The result was further impacted by a 198.8% increase in net interest paid to R701.8 million as a result of higher gearing and increased interest rates. “

The cumulative result was a loss before tax and capital items of R1.4 billion. Moreover, the Pick n Pay grocery business triggered a R2.8 billion non-cash impairment on the assets of Pick n Pay company-owned stores, resulting in an overall after-tax loss of R3.2 billion for the period.

With this in mind, the group did not declare a dividend for the financial year.

Group turnoverR106.6 billionR112.3 billion5.4%
Trading profitR3 048.0 millionR385.0 million-87.4%
(Loss) / profit after taxR1 169.9 million-R3 190.1 million-372.7%
Basic (loss) / earnings per share 243.37 cents-661.67 cents-371.9%
Headline (loss) / earnings per share259.25 cents-203.06 cents-178.3 %
Total dividend per share185.15 cents0.00 cents

Plan ahead

The poor performance of the group resulted in net debt increasing to R6.1 billion at year-end (FY23: R3.7 billion).

The group, however, plans a two-step equity capital raise plan to recapitalise the group to pay off debt.

This includes a rights offer in the middle of the year, in which the Ackerman family will forego their majority shareholder voting control of Pick n Pay.

Moreover, the group plans to list Boxer on the JSE by the end of this year.

The group is also resetting its store estate to minimise losses, where some Pick n Pay stores will be converted to Boxers, where customer demand and demographics call for it.

“Multi-year loss-making stores that are unsuitable for conversion to franchise or Boxer will be closed,” said the group.

Source: Pick n Pay

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