Pick n Pay’s load shedding bill shoots past R500 million

Pick n Pay says it has delivered an “encouraging performance” in its financial results for the year ended 26 February 2023, despite the damaging impact of load shedding on its bottom line.

The group said that its underlying earnings were ahead of the broadly flat guidance in previous communication to the market; however, the additional costs of running diesel generators, especially in the second half of the trading year, affected profits.

The group’s turnover increased by 8.9%, with Boxer’s sales growing by 20.2%. Boxer also opened 60 new stores, with 200 additional stores expected by FY26.

Pick n Pay South Africa’s sales growth was 4.3% (3.5% Like-for-like), but sales were impacted as the group began implementing its new customer value proposition (CVP).

Moreover, the fully converted Pick n Pay QualiSave stores achieved more than 10% in sales growth post-conversion.

Pick n Pay clothing also recorded 15.3% sales growth from its standalone stores, opening 58 new stores in the year.

Online sales also grew by 72%, as on-demand sales also grew well over 100%, according to the group. It said that the growth was driven by asap! and the new partnership, Mr D, launched last October.

However, the group spent an incremental R522 million on diesel to run generators (R430 million net of electricity savings), with the group also incurring anticipated costs of implementing its Ekuseni plan – a strategic plan to accelerate growth in some of the business’s key areas.

The group said that it limited its like-for-life cost growth to 7.9% due to the R800 million in efficiency savings under its Project Future.

Internal inflation was restricted at 8.5%, below the CPI at 10.4%, due to cost discipline and efficiency gains.

The group’s gross profit margin was relatively flat at 19.6%, with the group pro forma profit before tax declining by 15.1% year-on-year due to the underlying R430 million net energy costs.

Underlying profit before tax reached roughly R2.1 billion, up 7% year-on-year, it said.

Pick n Pay declared a total dividend of 185.15 cents per share for the year, down 16.3% from 221.15 cents the year before.

“Like everyone in South Africa, we have had to manage substantial inflationary cost pressures, exacerbated by an unprecedented worsening of load shedding,” Pick n Pay CEO Pieter Boone said.

Despite the pressures faced by the group, Boone said it achieved three key steps:

“First, we kept our eye on the ball and contained our costs very well. Restricting like-for-like cost growth to just 5.6% in Pick n Pay South Africa, despite significant additional costs from load shedding, was a major achievement.

“Secondly, our cost-discipline enabled us to keep our price increases well below CPI food. I know this is really important for every family in this country, and our commitment is that we will continue to do everything we can to keep prices down in the coming year.”

“Thirdly, despite the external headwinds, we nonetheless developed, launched, and implemented our Ekuseni strategic plan.”

2023 expectations 

Boone said that the group is accelerating its energy resistance plan to mitigate the cost of buying diesel to battle load shedding.

He urged stakeholders to look past the effects of load shedding and to instead focus on the underlying progress that the group is making on its Ekuseni plan.

“It is going to be another tough year. But I have every confidence in our plan, and in the ability of our teams to deliver it,” Boone concluded.

Read: Government leaves South Africa’s biggest retailers hanging with a R1 billion bill