Huge loss for Pick n Pay

Retail group Pick n Pay has posted a R827.4 million loss for the interim period of 26 weeks ending 25 August 2024—extending losses by 45% compared to the same period last year.

The group saw 3.7% growth in turnover for the period to R56 billion, and managed to post a small trading profit of R82.5 million thanks to its Boxer store operations.

However, financing costs of R1.13 billion wiped this out, resulting in a pre-tax loss of R1.05 billion, a further decline of 25.7% from 2023.

The group’s headline loss per share was 136.6 cents, 16.3% worse than the 117.5 cents in the comparable period.

Pick n Pay said that the first half of the year (H1 25) marked a period of “transformation” for the group, focusing squarely on restoring its financial stability and becoming sustainable.

This is being done through a recapitalisation plan, while turning around the core Pick n Pay business.

“A key highlight was the successful conclusion of the Pick n Pay Rights Offer, which raised R4.0 billion in new capital,” it said.

“Significantly, the Rights Offer was 106% over-subscribed, reflecting overwhelming shareholder support for the Recapitalisation Plan and a strong vote of confidence in the strategic turnaround strategy of Pick n Pay.”

However, this has yet to be reflected in the books, with the H1 25 results showing the continued strain on the business.

One of the highlights in the results was the performance of Boxer, which grew trading profit thanks to strong sales growth, “cementing its position as South Africa’s leading soft discounter”, Pick n Pay said.

Boxer generated R19.8 billion in group turnover, posting a trading profit of R801.4 million. Pick n Pay, meanwhile, generated a larger R36.3 billion in turnover but ended up with a R718.9 million trading loss.

Boxer’s store opening programme contributed 4.3% to total sales growth, with 12 net new stores, including one Pick n Pay conversion, added over the period.

The pace of new Boxer stores will accelerate in the second half of the year, with 53 more stores planned across all formats – bringing the total net new stores planned for FY25 to 65.

Meanwhile, the group saw the closure of 14 net Pick n Pay supermarkets during the period (10 company-owned and 4 franchise), alongside the termination of 10 franchise agreements.

The group said that restoring the core Pick n Pay brand is its top priority, and it is already starting to see some results on a like-for-like sales growth perspective.

However, it said “there remains a great deal of work ahead.”

It is now focusing on the in-store experience, with improvements across product range, product availability and customer service.

It is also taking on price competitiveness, with Pick n Pay’s internal selling price inflation over the period easing to 3.4%, below CPI of 4.7%.

Going as planned

Despite the loss, Pick n Pay noted that the results were “delivered exactly as planned” for the first time in several years, which it said reflected greater discipline and commitment to its new strategy.

Group chief executive Sean Summers said that he is confident that the “worst is behind us”, though acknowledged obstacles ahead for the business.

“On my return a year ago, I forecast that our financial performance and results would continue to get worse before they got better, and these results reflect that.

“Notwithstanding this, the results are in line with our business plan and encouragingly, Q2 showed a consistent by-period improvement over Q1, a trend that continues.

“Unlike twelve months ago, I can confidently say that the worst is behind us, notwithstanding the many obstacles that still lie ahead, as we restore Pick n Pay to its rightful place,” he said.

Looking ahead, the group is pushing forward with its separate listing of Boxer stores on the JSE, which it expects will raise between R6 billion and R8 billion.

In addition, it expects full-year FY25 earnings to show a meaningful improvement on FY24, supported by sustained earnings growth in Boxer, a reduced trading loss in Pick n Pay, and a reduction in H2 FY25 interest charges as a result of the advancement of the two-step Recapitalisation Plan.

Specifically with reference to the Pick n Pay segment, for FY25 the group is targeting approximately halving the R1.5 billion trading loss recorded in FY24.

The group is also anticipating a bumper Black Friday and festive season and is anticipating sales growth across both the Pick n Pay and Boxer segments to improve on the first half of the year.

Read: Pick n Pay continues closing stores in South Africa as separation looms