Pick n Pay boxes clever with its turnover-boosting Boxer stores

For the first time in its 55-year history, retailer Pick n Pay provided segmented sales growth figures, highlighting the performance of its lower-income Boxer stores, which grew turnover by 27.2% to R15-billion in the half-year that ended on 28 August. Chief executive Pieter Boone said the group was on track to double Boxer’s sales over the next four years.

Pick n Pay South Africa grew sales by 5.4% to R34.5-billion in the same period. To date, 93 stores have been converted to the QualiSave brand. Online sales grew by 82%, primarily through Pick n Pay ASAP! However, the retailer is set to go head-to-head with competitor Shoprite after the launch of a Pick n Pay grocery offer on the Mr D app, with full national coverage to be achieved by the end of the year.

Despite significant growth plans, management saw fit to reward shareholders with an interim dividend of 44.85 cents per share, up 25.3% on last year.

The retailer’s strategic Ekuseni plans seem to be paying off, with group turnover up by 11.5% at R51.3-billion for the six months to the end of August. Even accounting for disruptions owing to last year’s civil unrest, and Covid-19 liquor restrictions, turnover shifted up by 8.2%. Chairman Gareth Ackerman noted that internal selling price inflation of 7.2% for the six-month period reflected a highly inflationary environment.

“Our duty … is to provide the lowest possible prices in all our stores and this is a driving principle behind Ekuseni. I am proud [of how we have] mitigated the inflationary impact on our customers,” he said.

The latest NielsenIQ State of the Retail Nation report, measuring data over the four weeks to the beginning of September, shows that price increases remain a concern, with overall basket inflation sitting at 11% versus a year ago. This figure is calculated across 580 categories, weighted to their size in the basket. The managing director of NielsenIQ South Africa, Ged Nooy, said cooking oil had recorded 49% inflation. However, the continued price pressure had seen a decline in actual units sold.

“Consumers have been forced to adapt their palate and usage patterns in the face of price pressures and this is now showing in reduced volume sales,” he said.

Despite experiencing relatively mild inflation, long-life milk and sugar have also taken hits, as has chilled processed meat. Fresh milk was another casualty of the inflationary environment despite having relatively low inflation.

However, Nooy said bread continued to beat the curve with 15% volume growth over the past three months as sales of maize meal and energy drinks continued to soar.

Pick n Pay’s chief financial officer, Lerena Olivier, said that in a volatile environment the group had prioritised continuity of supply, which meant holding more stock in a rising market.

The group’s gross profit margin increased from 18.2% to 19.4%. However, this did not factor in the cost and disruption of the 2021 riots. Olivier said that, taking this into account, the gross profit margin contracted on a normalised basis by 0.6%.

Ackerman said the retailer aimed to have 10 company-owned sites with solar energy supply by the end of the year and would be working with landlords to add additional alternative power sources.

Pro forma profit before tax in SA increased by 17.1%, despite increased insurance and security costs since the 2021 riots, inflationary pressures and planned costs associated with implementing the Ekuseni plan.

Boone said that, when the Ekuseni plan was launched, it was clear the 2023 financial year would be an investment year, with costs in implementing the plan and investing to get the right prices for consumers.

“The next six months will also continue to see strong headwinds, including inflationary pressures, rising energy prices and load shedding,” he concluded.