Massive blow for Pick n Pay

Pick n Pay expects to record a substantial loss of over R3 billion, despite increased sales.

In a sales update and trading statement for the year ended 25 February 2024, the group said that Pick n Pay South African supermarkets saw sales growth of -0.2% (+0.2% like-for-like).

However, Boxer’s sales growth was 17.5% (8.1% like-for-like), boosting total South African sales growth for the period of 5.2% (2.6% like-for-like).

Pick n Pay Clothing sales growth from standalone stores of 17.0% (7.7% like-for-like).

Pick n Pay Online delivered sales growth of 74.4%, driven by ongoing progress in the Asap! platform and its Mr D partnership.

Despite the increase in overall group sales, the group expects to declare a headline loss per share of between 177.14 and 228.99 cents.

The group said that contributing factors to the loss include:

• Once-off costs of R423 million, including R116 million duplication of supply chain costs during
  the Longmeadow / Eastport handover, and R307 million employee restructuring costs;

• Additional trade receivables provisioning of R0.4 billion, reflecting the difficult trading environment in South Africa, and including a R0.2 billion provision increase in Botswana;

• Incremental net debt service costs of R467 million from increased gearing and higher interest rates;

• Total diesel costs to run generators of R698 million (R652 million for FY23).

• The group has added back the R2.8 billion store asset impairment (R2.2 billion net of tax) alongside
  all other impairments, for purposes of the calculation of HEPS.

However, the group said that it is making progress on its Recapitalisation Plan, which includes a proposed renounceable rights offer to existing shareholders of the company of up to R4 billion, which should take place in mid-2024.

This will be followed by a proposed share offering and subsequent listing of Boxer on the JSE (IPO), which should happen near the end of 2024.

The Rights Offer and IPO proceeds will be used to repay all group debt, which totalled R6.1 billion at the end of February, except to the extent that lenders elect to provide ongoing working capital facilities beyond the IPO.

Read: Another healthcare group joins the chorus of warnings over the NHI in South Africa