JOHANNESBURG - Pick n Pay yesterday said that it expected its profits to plunge more than 60 percent for the 26 weeks ended August as liquor, tobacco, and clothing sales took a nose-dive as a result of the country’s Covid-19 lockdowns regulations to curb the spread of the pandemic.
Pick n Pay, one of South Africa’s supermarket giants, said its headline earnings were now projected to fall as trade restrictions imposed by the government and other jurisdictions across southern Africa hit its revenue at different stages of the nationwide lockdown and disproportionately affected higher-margin categories including liquor, clothing and general merchandise.
“Sales were also impacted by reduced trading hours and limits on the number of customers in stores to uphold physical distancing requirements, and by temporary store closures following the identification of positive Covid-19 cases among staff,” said the group.
The group said its sales were the hardest hit by the full prohibition over liquor sales for 15 weeks of the 26-week trading period and reduced trading hours for all but the first three weeks of the half-year.
“This inevitably had a profound impact on liquor and tobacco sales, with negative growth of 47.5 periods over the period,” said the group.
Clothing turnover fell 4.2 percent in South Africa, as clothing sales were prohibited during the level 5 lockdown, and were subject to some continuing restrictions under level 4. However, core retail sales including food, groceries and general merchandise grew 8.7percent year-on-year, with a 9.9 percent growth recorded in South Africa.
“The 4.2 percent volume growth in the group’s core food and grocery offer in South Africa demonstrates the underlying strength and competitiveness of the group’s performance over the period,” said Pick n Pay.
Group turnover increased 2.6 percent year-on-year, with like-for-like growth of 1 percent. Turnover from South African operations increased 3.4 percent, with like-for-like growth of 1.7 percent.
The group said internal selling price inflation in South Africa contained 3.4 percent over the period, against CPI food inflation of 4.3 percent. It said it had incurred R150million additional costs as part of its response to the Covid-19 crisis including additional safety and hygiene costs of R80m. Pick n Pay awarded an R50m appreciation bonus to 50000 front-line staff, and incurred security and communication costs of R20m.
The group also paid a once-off R100m towards its voluntary severance programme aimed at reducing costs. More than 1400 employees opted to take voluntary severance packages at the beginning of the financial year.
Pick n Pay said it managed to find innovative ways to serve customers, for example to meet the increased demand for online shopping it introduced an on-demand grocery service. It also raised more than R80m together with its customers in hunger relief efforts, providing 20 million meals to vulnerable families. On a month-on-month basis the most negative effects by sub-indices of the BCI came from depressed retail sales volumes, lower share prices on the JSE, and less real credit to the private sector.
Pick n Pay shares rose 1.65percent on the JSE yesterday to close at R46.70.
BUSINESS REPORT