The supermarket group says first-half earnings will be less than half those reported last year due to Covid-19 and retrenchment costs.
Pick n Pay has blamed trading restrictions, increased expenses as a result of Covid-19 and retrenchment costs for an expected slump in first-half earnings. But the retail group has gone out of its way to reassure investors that its business remains sound.
In an earnings update, the supermarket group said its financial year started just a few days before the first Covid-19 cases were identified in the country and three weeks before the national lockdown was declared. As a result, earnings for the six months to end-August would reflect the ‘considerable’ impact of the crisis to date. Headline earnings per share for the period were likely to be more than 50% lower than the 85.03c reported last year, it said.
First-half sales were negatively impacted by restrictions on sales of tobacco and alcohol, as well as clothes and hot food in the initial stages of the lockdown. Together, these categories made up around 20% of its revenues and were more profitable than its basic food and grocery lines. Fewer customers entered its stores due to restrictions on the number of customers at any one time, adding further pressure on sales.
On top of the costs incurred to keep its stores and distribution centres open as the pandemic spread and to safeguard staff and customers, the retailer said it paid an appreciation bonus of R1,000 to all front-line workers in April and May.
Pick n Pay said it would bear the costs of its voluntary severance programme (VSP), which resulted in the departure of more than 1,400 employees, in the first half of its financial year, and it would be cost neutral for the full year as it benefitted from a lower salary bill. After that, it would have a positive impact on operating costs.
I want shareholders to understand and be reassured that the impact on our first-half earnings that we are announcing today derives solely from the specific circumstances of the pandemic, the impact of measures taken by government and ourselves to mitigate it, and the once-off costs of our VSP which has made the Group leaner and more competitive,” CEO Richard Brasher said. “Our business remains strong and stable, and well-placed to serve customers and shareholders in the future.”
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