Pick n Pay has reported double-digit growth for the first 18 weeks of its financial year, when it was able to keep store price rises below consumer inflation. However, it expects that to worsen.
“Consumers are currently bearing the brunt of rising inflation, not just in SA but across much of the world,” chair Gareth Ackerman said at the retailer’s annual general meeting (AGM) on Tuesday. “Consumers are really struggling, inflation is on the rise, and interest rates have also increased, adding to their burden.”
The retailer released a trading update for the 18 weeks to July 3, reporting that in SA Pick n Pay saw like-for-like sales growth of 8.3%, above internal inflation of 5%. The group said it was pleased it could keep price increases in SA below the consumer price index of 7.1%.
SA’s second-biggest supermarket group warned, however, that consumer price inflation is expected to rise further, having hit 8.6% in June.
Pick n Pay spent R900m in February buying commodities such as maize (mielie meal) as it braced for the inflationary fallout from Russia’s invasion of Ukraine. Retailers with large warehouse are able to store food at lower prices and pass savings on to consumers, which Pick n Pay aims to do.
However, even as Pick n Pay targets internal cost savings of R3bn over three years, it expects rising costs that it cannot offset in its business, including fuel, electricity and municipal rates. Since the July 2021 riots, insurance and security costs too have risen significantly, it said.
Pick n Pay is closing its Kensington head office in Johannesburg and moving to a smaller space so that it can save money and benefit from a hybrid working environment, as many administrative staff members work mostly from home now.
In the 18-week update it noted that overall sales rose 10.7%, with those in SA up 10.5%, reflecting both volumes and price growth. This result also shows it may be catching up and competing better with market leader Shoprite, which posted similar growth figures in its 52-week update released on Tuesday.
Pick n Pay group alcohol sales grew 9.6% in the first 17 weeks, showing the importance of liquor in the business, CEO Pieter Boone said at the AGM. If compared to the full 18 weeks, which included a week of a liquor bans, sales grew 17.2%, but off a distorted base.
The clothing division noted a sales increase of 17.1% as consumers bought more affordable clothing.
Total online sales for the period, including scheduled delivery, click-and-collect, and the on-demand online service, grew 97.3%.
By the JSE’s close Pick n Pay’s shares had gained the most in six weeks, up 3.22% to R58.70. They have risen 11.87% so far in 2022, while the JSE’s food retailers’ index has fallen 4.25%.
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