Retail giant, Pick n Pay says efficiency gains and cost savings across its supply chain have helped cushion it from the impact of Covid-19 trading restrictions, which cost it an estimated R4-billion in lost sales last year. The retailer has described its performance for the year to end-February as “outstanding” in the face of the pandemic.
The retailer launched Project Future over a year ago to modernise the group and improve efficiencies. It said these helped it lower prices and provide better value and service for customers, while delivering R600-million of cost savings. It said it was on track to meet its target of R1-billion over two years.
Stripping out the impact of lost alcohol and tobacco sales, as well as other non-essential items like clothing during the height of last year’s lockdown, Pick n Pay said its core food and grocery business in SA delivered a market-leading performance, up 10% year-on-year, with 5.1% like-for-like volume growth in the second six months.
Apart from the margin impact of restricted sales, earnings for the year were also affected by once-off compensation costs arising from voluntary and other retrenchments under Project Future. R200 million once-off costs were incurred in compensation payments arising from a voluntary severance programme and some further retrenchments to improve support office efficiency.
For the year, group turnover rose 4.3% to R93.1-billion but trading profit declined by 15% to R2.71-billion. Net profit fell 19% to R967-million, resulting in basic earnings per share (EPS) of 202.52c. Headline EPS came in 21.4% lower at 229.31c. On a comparable basis, which excludes hyper-inflationary adjustments related to its associate in Zimbabwe, they were down 17%. Also excluding once-off compensation costs, they were 6.1% lower at 265.58c per share. The retailer has lowered its total dividend for the year by 17% to 179.74c per share.
Our market leading sales growth in a difficult environment shows how we have kept our focus on our customers in the most challenging of times,” CEO Richard Brasher said. “Once the impact of once-off costs is taken into account, our earnings performance was exceptional despite all the challenges and disruption of this extraordinary year.”
Brasher, who has been CEO for eight years, retires at the end of the month. He’ll be replaced by Dutch national Pieter Boone, who was previously chief operating officer of Metro AG, a leading international business in the food and hospitality sector, and SHV Holdings, one of the world’s largest private trading groups, which includes the major Makro Cash & Carry wholesale business.
He has definitely left Pick n Pay in a better position than when he arrived. Product rationalisation, improvements to central distribution and increased focus on the lower end of the market will stand out as key achievements in his time,” said Zaid Paruk, a portfolio manager and analyst at Aeon Investment Management. “The market will keenly watch CEO Pieter Boone who comes with a wealth of cross continental experience.”