Pick n Pay loses R1.7bn due to civil unrest and liquor restrictions
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Retailer Pick n Pay said yesterday in a trading update for the 26 weeks ended August 29 that despite severe trading and operational disruptions in the second quarter of the financial year, the group “had delivered a resilient and positive performance, maintaining underlying momentum on sales and earnings growth”.
It reported sales growth of 4.1 percent for the period. Normalised sales growth of 8 percent year-on-year, excluding the estimated impact of the civil unrest disruptions in July, reflecting a solid progress against a number of the group’s strategic priorities - including another market-leading sales performance by Boxer, better value for customers across Pick n Pay and Boxer and progress in growing Pick n Pay’s omnichannel offer, it said.
The retail said its first half earnings would demonstrate continuing benefits from its Project Future modernisation programme - including a more efficient supply chain, more cost-effective store and support office operations, and strong management of working capital and capital investment.
In an update on the civil unrest in KwaZulu-Natal and Gauteng in July, the group said it had a significant impact on its operations, which saw 212 stores - 112 Pick n Pay and 100 Boxer - damaged by looting and destruction, with many stores requiring extensive restoration before re-opening.
It had re-opened 145, or close to 70 percent, of these damaged stores by the end of August, with a further 18 stores re-opened in September. As well as damage to stores, Pick n Pay’s two largest distribution centres in KwaZulu-Natal were looted of all stock and suffered considerable damage to infrastructure, which were subsequently reopened, it said.
At the height of the unrest, Pick n Pay had closed an additional 551 stores, 417 Pick n Pay and 134 Boxer, but the majority of these stores re-opened within four days, and all were trading by the end of July.
“The group incurred material damage losses (stock and assets) of approximately R900 million. These losses were fully covered by the group’s Sasria insurance policies. The Group is working with insurers and advisors to expedite all claims under the policy, and has to date received R600 million in interim payments,” it sadi.
Pick n Pay also expected to recover the majority of all related lost profits under its business interruption insurance covers, subject to relevant policy limits and deductibles.
“ Although it is not yet possible to quantify the full impact of the business interruption on sales and earnings, the group estimates that it resulted in approximately R930 million of lost sales over the months of July and August,” it said.
The group said it was confident that it had the level of certainty required to provide for the recovery of the majority of its losses.
Pick n Pay said in an update on Covid-19 trading restrictions, that its liquor business lost a further 55 trading days this period, as a result of the government’s continuing restriction of off-site alcohol sales in response to the Covid-19 pandemic, which resulted in an estimated R800 million of lost sales over the period.
However, Pick n Pay said it had entered the financial year with good trading momentum, which was maintained in the first quarter, with an encouraging performance, in line with its expectations.
However, the severe trading disruptions resulting from the civil unrest and restrictions on liquor sales resulted in an estimated R1.7 billion in lost sales in the second quarter.
Across the whole first half, group turnover increased 4.1 percent year-on-year to R4bn.
The group’s estimated normalised sales growth, excluding the impact of disruption, was 8 percent for the period.
The group expected its comparable headline earnings per share for the 26 weeks to august to august 29 to be between 85 percent to 95 percent higher, or 68.67 cents per share to 72.38 cents per share from 37.12 cents per share the comparitive period.
It expected to release its financial results for the 26 weeks ended August 29 on Ocotover 20.