Pick n Pay announced plans to close over 100 stores following disappointing financial results for the fiscal year ending 25 February 2024.
Pick n Pay financial results for fiscal year ending 25 February 2024
Pick n Pay’s financial results for the fiscal year ending 25 February 2024 highlighted several critical issues, showing both operational and financial difficulties.
The company reported a turnover of R112.3 billion, which marked a 5.4% increase compared to the previous year.
However, despite this increase in revenue, the company’s trading profit dropped dramatically by 87.4% to R385 million.
A significant comparable loss before tax (PBT) of R1.7 billion was recorded, driven by substantial one-off and incremental costs.
The gross profit margin contracted by 150 basis points to 18.1%, mainly due to increased promotional activities and reduced supplier incentives.
Total expenses rose by 11.9%, influenced by a once-off employee restructuring cost of R307 million and an incremental debtors provisioning of R435 million.
The year also saw total impairments amounting to R2.8 billion due to underperforming stores and strategic restructuring initiatives.
Main takeaways from the results
Turnover and Sales Growth:
- Pick n Pay reported a 5.4% increase in turnover to R112.3 billion.
- Pick n Pay’s segment showed marginal growth of 0.3%, while Boxer’s sales grew by 17.3%.
Gross Profit and Margins:
- The gross profit margin contracted significantly to 18.1%, indicating pressure on profitability.
- Increased promotional activities and lower supplier incentives contributed to margin contraction.
Trading Profit:
- Pick n Pay’s trading profit declined from a R1.3 billion profit to a R1.5 billion loss.
- Boxer performed robustly with a trading profit of R1.9 billion, reflecting strong operational performance in this segment.
Expenses:
- Total expenses increased by 11.9%, largely due to restructuring costs and incremental debtors provisioning.
Impairments and Losses:
- Total impairments of R2.8 billion were recorded, significantly impacting the company’s financial position.
Pick n Pay plans to close 100 stores: Here’s what you must know
In response to the financial challenges, Pick n Pay announced a strategic plan to close over 100 underperforming stores.
This decision is part of a broader effort to reset its store estate and improve overall profitability.
The closure of these stores is expected to save approximately R850 million in costs and avoid further losses.
The plan includes converting certain Pick n Pay stores to franchises or Boxer stores, aligning with the market demand and profitability metrics.
The company will also modernise the remaining stores and engage in significant repairs and maintenance that have been deferred.
To support its strategic initiatives, Pick n Pay unveiled a two-step recapitalisation plan involving a rights offer and an IPO of Boxer.
This plan aims to raise between R10 billion and R12 billion, which will be used to repay debt, invest in business operations, and unlock value in the Boxer brand.
These efforts are intended to stabilise the company’s financial health and position it for future growth.
Furthermore, Pick n Pay is focusing on optimising its operating model to save an estimated R1.3 billion over the next three years.
This includes better supply chain management, reduced expenditure on non-core areas, and enhanced customer service.
