Ahead of its AGM, Pick n Pay on Wednesday said it expected to report an interim loss for the six months to end-August, which analysts believe could be the first on record.
This is due to one-off costs associated with load-shedding, switching distribution centres and staff retrenchments.
The group faced repeated questions from activists about its pay policies at its AGM, but would not explain what prevents it from disclosing what the lowest paid worker earns. This is despite being asked this for a third year running. Shoprite and Woolworths have disclosed lowest paid workers’ salaries.
According to analysts, this may be the first half-year loss Pick n Pay has recorded, with some saying they could not remember an interim loss in 20 years. An analysis of Bloomberg data for the past 15 years shows no interim loss.
Pick n Pay said extra one-off costs amounted to R610m, while its normalised profit before tax in the interim period last year amounted to R588m.
“These abnormal costs give rise to an expectation that the group will report a 2024 half-year loss at the earnings, headline earnings and pro forma headline earnings level,” it said.
The one-off costs include R250m related to moving from its Longmeadow distribution centre, as well as R250m on staff restructuring. It also had one-off restructuring costs in August 2020 when 1,400 workers took a voluntary severance package.
The company is selling lower volumes as customers cut back and shop at competitors. Its like-for-like sales in SA including Boxer, Pick n Pay and its clothing business grew 0.9%.
With expected price inflation at about 11%, this means Pick n Pay group sold 10% lower volumes than the year before, retail analyst Syd Vianello estimates. He said Spar was selling lower volumes, but these had not dropped nearly as much as those of Pick n Pay.
Vianello does not remember the retailer posting a loss, but said it should make a full-year profit. The first half to August is the weaker half as it does not include the peak retail season, he said. Checkers was clearly stealing customers from Pick n Pay with its Sixty60 delivery service, revamped stores and promotions, he said, while he believed some of Pick n Pay’s market was emigrating.
Sasfin’s Alec Abraham also does not remember a single loss in at least the past 20 years. He said Pick n Pay’s trading update “showed that ‘fixing’ the business still has some way, and costs, to go”. Checkers is much further ahead with its centralised distribution model which is more efficient, he said.
Pick n Pay CEO Pieter Boone said that its Ekuseni strategy to roll out Boxer stores to a growing discount market, expand its successful clothing stores and revamp lower-end Pick n Pay stores into Qualisave chain stores was showing results.
At the AGM, Pick n Pay again faced questions on its executive remuneration policy and was asked when it will disclose what the lowest-paid worker earns. Activists believe this is important in addressing rising inequality.
Executives said Pick n Pay would do so when the “time is right”. Head of the remuneration committee Audrey Mothupi said: “We deliberated ... publishing the results this year and came close to doing so.”
She said the retailer needed to calculate the wage gap in a way that would ensure comparability across the industry when disclosing it.
Analyst at shareholder activism organisation Just Share, Ayabulela Quzu said the refusal to disclose the lowest paid workers’ earnings is “not reasonable at all”. Pick n Pay has this information at its disposal and is in fact required to report it to the labour department, he said. “Two of Pick n Pay’s closest competitors, Shoprite and Woolworths have already made headway in this regard.”
Quzu told Business Day, “we have been engaging with Pick n Pay on this issue for three years. It is concerning that ... it has not been able to come up with definitive time frames ... or [say] what specifically is delaying this disclosure”. He told executives at the AGM: “What we basically want is a timeline of when we can expect this disclosure and not just a generic ‘at the right time’ answer”.
Mothupi said a wage analysis found no race or gender bias in pay levels. The analysis confirmed expected high levels of income disparity as a result of a large proportion of unskilled and semi-skilled workers in its labour force, she said.
Pick n Pay said it was “doing a lot of work” on its remuneration policies and offering staff a fair living wage.
The share closed 8.19% lower at R35.11.
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