Pick n Pay warned of as much as a 60% drop in half-year earnings on Wednesday, underlining the costs of staying open during the pandemic and the effect of trading restrictions for virtually its entire March-August reporting period.
The company expects that headline earnings per share, the main profit measure that strips out certain one-off, nontrading items, could fall in a range of 50%-60% to between 34.01c and 42.51c in the 26 weeks to the end of August.
The profit warning revealed it was not cheap for retailers to stay open, even when other firms were ordered to shut their doors, as Pick n Pay spent an extra R150m, including on a bonus for frontline workers and increased cleaning and security.
The government-imposed ban on clothing and general merchandise sales in April, a 15-week liquor ban and a five-and-a-half-month tobacco sales ban reduced its revenue by as much as 20%. The retailer’s tobacco and liquor sales were down 47.5% year on year.
Pick n Pay also said a R100m cost to fund the voluntary severance packages of 1,400 workers had also hit profit. Excluding that cost, it said headline earnings would have dropped by between 35% and 45%.
Competitor Shoprite, which owns Checkers and U-Save, saw its second-half SA sales from January to June grow 7.5%.
Local sales grew 3.4% in Pick n Pay’s first half, but the March-August period included more lockdown trading restrictions.
Nic Norman-Smith, of LanciaConsult, said it was hard to compare the two companies’ results as the time periods differed. "The economic destruction caused by the draconian and illogical lockdown policies would have put pressure on consumers’ spending power as jobs were destroyed. At the same time the required interventions from Pick n Pay would have increased costs and distracted management as they had to constantly adjust to the near-daily government decrees."
Pick n Pay said its core food and grocery business remained resilient, excluding liquor, growing 9.9% in SA year on year, with a 7.6% like-for-like increase.
The share price closed 1.56% higher at R46.70.
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