• Pick n Pay has reported a 16.3% drop in earnings for the year 2023
  • Electricity crisis remains a major challenge for retailers
  • Retailers in South Africa have been forced to rely more heavily on diesel generators to power their stores

Harare-Pick n Pay, South Africa's second-largest supermarket chain, has reported a significant fall in its earnings for the year 2023. The company's annual earnings were down by 16.3%, which was attributed to a number of factors.

While indicating that they incurred an additional cost of 522 million rand or about $29 million for diesel to run generators in the year ended Feb 26, the company cited the impact of power cuts, which is the worst on record in the country. State electricity utility, Eskom, has been implementing rolling blackouts of up to ten hours a day, which has disrupted manufacturing activities and adversely affected businesses.

Retailers, in particular, have had to resort to using diesel generators to power their stores and warehouses, an additional cost that has put pressure on margins and eroded earnings. In response to these challenges, Pick n Pay has implemented a new growth strategy that includes revamping old stores and adding new ones. Consequently, the company has incurred some planned costs in implementing these initiatives which are part of the ongoing plans to stay competitive in the retail industry.

Despite the fall in earnings, Pick n Pay has recorded an increase in group turnover for the period under review. Group turnover, according to the report, increased by 8.9% to 106.6 billion rand. Growth in the discount grocery chain Boxer sales in South Africa was the key driver behind the impressive sales increase, which was up by 20.2%. However, the group's gross margin remained flat at 19.6%.

The company's earnings per share also took a hit, with annual pro-forma headline earnings per share (HEPS) falling to 242.37 cents. However, this decline is not as dramatic if non-cash hyperinflation gains and losses as well as insurance proceeds from business interruptions are excluded. In such a scenario, the decline was only 1.3%.

Pick n Pay's challenges in the year 2023 reflect the difficult economic and business environment in South Africa. High levels of unemployment, low GDP growth, and competition from competitors in the retail industry are some of the factors that have weighed down businesses in the country. Ultimately though, it is hoped that the measures taken by companies such as Pick n Pay to overcome the hurdles will bear fruit in the long run, ultimately benefitting the business climate in South Africa.

Equity Axis News