• Pick n Pay achieved strong sales momentum in Boxer and Online segments.
• Load shedding costs impacted Pick n Pay SA's sales performance.
• Pick n Pay's Rest of Africa segment saw sales increase, but faced challenges.

Sandton- Pick n Pay, one of South Africa's largest retailers, has released a trading update for the first half of FY24. The report shows that the company continued to make progress on its Ekuseni Strategic Plan and achieved strong sales momentum in its Boxer and Online segments. However, the company faced margin pressure due to elevated load shedding costs, which impacted its sales performance in Pick n Pay SA. 

According to the report, Group sales for the first four and a half months of FY24 increased by 4.8%, with South Africa sales growth for this period at 4.4% (0.9% like-for-like). The Group's Rest of Africa segment sales increased by 15.9% (12.0% on a constant currency basis). Clothing sales in stand-alone stores grew by 10.9%, while Group liquor sales for the period grew by 9.8%. Online sales growth for the period was 75.3%, sustaining the strong online sales growth momentum reported for FY23.

However, South Africa sales growth for the period was constrained by a slow performance from Pick n Pay, while Boxer sales accelerated moderately from the 14.4% reported for H2 FY23. Pick n Pay SA sales declined by 0.3% which the company attributes to reduced promotional activity during the period as Pick n Pay managed the impact of extraordinary operating cost pressures caused by elevated load shedding.

20 weeks ended 16 July 2023
                                                                              % growth
Pick n Pay SA sales                                                   -0.3%
Boxer SA sales                                                           15.4%
SA total sales                                                             4.4%
Rest of Africa sales                                                   15.9%
Group turnover                                                         4.8%

Gwenzi, Equity Axis Chief Analyst, commented on the future outlook for Pick n Pay, stating that the company's performance has been impressive despite the challenges it faced during the period. He noted that load shedding in the country is likely to continue to impact the company's operations, but the Group's Ekuseni Strategic Plan and Project Future people initiatives should help the company drive efficiencies and cost savings.

Regarding the impact of load shedding on Pick n Pay's business, Gwenzi stated that the company's ability to manage its costs during this period is commendable. However, the ongoing power outages will likely continue to impact the company's sales momentum, especially as consumers look for alternatives to in-store shopping. Online sales growth is likely to continue to be a key driver of growth for the company, as more consumers turn to e-commerce for its convenience.  

The trading update also highlighted the performance of Pick n Pay's Rest of Africa segment, which saw sales increase by 15.9% (12.0% on a constant currency basis). However, this growth was not without its challenges. In Zimbabwe, the company's TM Pick n Pay stores are facing currency volatility and depressed disposable income, which may impact sales in the coming months. A bit of currency strengthening in Zimbabwe may help drive volumes between now and August as Zimbabwe heads to an election year. TM Pick n Pay is poised to benefit from spent associated with elections.  Meanwhile, in Zambia, there is greater stability, although consumer spending remains limited. With the incoming IMF relief, we are likely to see a better Zambia coming in FY24 as the country starts to drawdown from its US$189 million which is likely to influence the country’s spent. Despite the challenges, Pick n Pay remains committed to its expansion plans in the rest of the continent, and the company's strong performance in this segment is encouraging.

Looking ahead, Gwenzi believes that Pick n Pay's strong focus on low prices and commitment to delivering value to consumers will help the company weather the challenges posed by load shedding and other macroeconomic factors. He expects the company to continue to make progress on its strategic plan and drive growth in its Boxer and Online segments, while also optimizing the efficiency of its Pick n Pay supermarkets. Overall, Gwenzi is cautiously optimistic about Pick n Pay's future prospects, despite the challenges faced by the company and the broader retail sector in South Africa.

-Equity Axis News