Wrap Text
Pick n Pay Stores Limited
Incorporated in the Republic of South Africa
Registration number: 1968/008034/06
JSE Share Code: PIK
ISIN code: ZAE000005443
('Pick n Pay' or 'the Group')
Pick n Pay - Trading update for the 18 weeks ended 3 July 2022
Group sales for the first 18 weeks of FY23 (YE February 2023), covering the period 28 February 2022
to 3 July 2022 increased 10.7%. The Group's South Africa segment grew sales by 10.5%, with like-for-
like sales growth of 8.3%. South African internal selling price inflation for the period was restricted to
5.0%, below 7.1% CPI Food. The Group's Rest of Africa segment revenue increased by 18.9% and by
9.5% on a constant currency basis.
The FY22 sales base for the period (first 18 weeks of FY22) was unaffected by the July 2021 civil unrest,
which began on 9 July 2021. However, the FY22 base period did include the loss of 18 days of liquor
trading due to Covid-19 trading restrictions.
Category performance
Group liquor sales for the period increased 17.2% year-on-year, supported by the annualisation of a
full liquor lockdown in week 18 of the base period. Liquor sales growth for the first 17 weeks of FY23,
at 9.6%, provides a better indication of the underlying liquor sales trend.
The clothing division delivered another strong performance, with sales increasing 17.1% on a year-on-
year basis.
Total Online sales for the period, including scheduled delivery, click and collect, and asap!, our on-
demand online service, grew 97.3%.
As previously communicated, Boxer segmental sales will be disclosed going forward, starting with the
interim FY23 result.
Ekuseni Strategic Plan
Pick n Pay has now upgraded 10 stores to the new Ekuseni customer value proposition (CVP), including
6 in the Project Red format, with exceptionally encouraging initial results. Weekly sales of the initial 5
pilot CVP stores (whose longer sales history provides a more accurate underlying read than for all 10
stores) grew by 18% on average since launch. This excludes the first 3 weeks of trading post the
upgrades, where sales growth was considerably higher but supported by re-launch promotional
activity. Sales growth was driven by increases in both traffic and basket size, and growth in the
identified Power Categories of each format has been particularly pleasing.
The Net Promoter Score (NPS) of the upgraded stores has improved by more than 25% on average in
the 6 weeks since launch. Ekuseni is targeting 20% growth in the NPS score across Pick n Pay company-
owned supermarkets over the term of the plan.
Lessons learnt from the initial upgrades include that strong results are achievable with limited capital
expenditure per store given the right CVP and rigorous execution. This has given us confidence to
accelerate the plan. Our objective is to have 40 stores upgraded to the new CVP by the end of H1FY23,
and 150 by February 2023.
The acceleration of our Boxer and Clothing store opening plans is proceeding well. Pick n Pay Clothing
has 73 new store openings confirmed for FY23 (vs. 27 in the whole of FY22). Boxer is on track for 61
FY23 new store openings (vs. 36 in FY22). Boxer continues to grow ahead of the market and is
progressing well on its plan to double sales by the end of FY26.
Progress towards our goal of a step-change increase in online sales continues. The launch of a
dedicated Pick n Pay food and grocery offer on the Mr D App is on track. The initial launch will be in a
limited number of stores in August, with national coverage targeted by the end of FY23.
Project Future
The Group is making good progress on its target to improve efficiency and reduce costs by R3 billion
over the next three years. Among the key elements in delivering this plan, the Group has now
announced the closure of its Kensington campus in Johannesburg by December 2023 as part of its
move to a more flexible and cost-effective support office. The Group is continuing to achieve ongoing
supply chain efficiencies, and Pick n Pay's new Eastport DC is on-track to open in March
2023. Discussions with unions are progressing on delivering a more flexible and productive workforce
which can better serve customers.
Operating expenses
In common with other businesses, the Group is experiencing significant operating cost pressures in
the current financial year. These include material increases in rates, electricity, utility and fuel costs.
The July 2021 riots have also resulted in very significant increases in the cost of insurance and
security. As previously announced, the implementation of the Group's Ekuseni strategic plan also
gives rise to additional costs in the current financial year ' to fund the acceleration of our Boxer and
Clothing store rollouts, and store upgrades as Pick n Pay implements its new CVP.
Project Future's objective is to deliver savings in order to offset some of these operating cost
pressures. However, the magnitude of cost inflation, and that Ekuseni investment precedes Project
Future savings in some respects, mean that FY23 cost pressures will not all be offset through greater
efficiency.
Inflation
The Group's objective is to maintain price investment at a particularly challenging time for consumers.
The Group's 5% RSA internal inflation was below 7.1% CPI Food for the period. Advance purchases of
strategic stock, totalling R0.9bn at February 2022, have assisted in keeping internal price inflation
below CPI Food. We anticipate CPI Food to accelerate further (June CPI Food was 8.6%) and will
continue to invest in price in order to support consumers.
Outlook
The Group's sales growth in July is accelerating as we annualise the civil unrest, which began on 9 July
2021, and restrictions on liquor sales in July 2021. As a reminder, 763 of the Group's stores (40% of
the base) were closed in July 2021, with 67 still closed in August 2021. We estimate lost sales for July
and August 2021 of R0.93bn from the civil unrest alone (excluding liquor restrictions).
More broadly, the Group expects the consumer environment to remain challenging, as a result of
globally rising inflation and interest rates, and the ongoing impact of severe load-shedding locally.
Despite this, the Group remains confident that it has the right Ekuseni strategic plan, with its emphasis
on delivering greater efficiency and growth focused on areas of the market where consumers are
seeking unbeatable value. We are confident our Ekuseni initiatives will continue to drive sales
momentum this year.
Taking into account the FY23 operating cost pressures mentioned above, we reiterate our guidance
that we expect Ekuseni to drive meaningful earnings growth from FY24 only (vs. the FY22 Pro forma
Headline Earnings base).
Pro forma constant currency information
The constant currency sales growth information contained in this announcement has been presented
to illustrate the impact of changes in the Group's major foreign currencies - namely the Zambian
kwacha and the Botswana pula - on the sales growth of its Rest of Africa segment. The Group's Rest of
Africa segmental revenue growth in constant currency is calculated by translating the prior period local
currency revenue at the current period average exchange rates on a country-by-country basis and then
comparing that against the current period revenue translated at current period average exchange
rates. The pro forma constant currency information is presented in accordance with the JSE Listings
Requirements, is the responsibility of the Board of directors of the Group and is presented for
illustrative purposes only. The pro forma financial information may not fairly present the Group's
financial position, changes in equity, results of operations or cash flows.
The financial information on which this trading update is based has not been reviewed by or reported
on by the Group's external auditors.
By order of the Board
Cape Town
26 July 2022
Sponsor: Investec Bank Limited
Date: 26-07-2022 07:30:00
Supplied by www.sharenet.co.za
Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
Sharenet Sites 
