South African retailerPick 'n Pay (JSE: PIK / FRA: PIK) just released earnings that show some green shoots for the future as well managed businesses learn to adapt to deteriorating conditions in South Africa and the vacuum left behind by an increasingly non-existent government.
OVERVIEW:
Consumer champion Raymond Ackerman purchased the first four Pick n Pay stores in Cape Town, South Africa in 1967. Since then, the Group has expanded to encompass stores in South Africa, Namibia, Botswana, Zambia, Swaziland and Lesotho. In addition, Pick n Pay owns a 49% share of Zimbabwean supermarket chain, TM Supermarkets.
The Group operates through multiple store formats under three brands – Pick n Pay, Boxer and TM Supermarkets. Pick n Pay also operates one of the largest online grocery platforms in sub-Saharan Africa.
Focuses on groceries, clothing and general merchandise plus additional value-added services.
Pick n Pay’s shares ended the day 9% lower as the market digested the worrying picture the retailer portrayed of operating in South Africa and the increased hardships and reality of running a massive consumer-based business amid the worst energy crisis the country has faced.
Anchor Capital investment analyst Zinhle Mayekiso: "The retail sector in South Africa is currently navigating a tough economic environment and is also having to contend with increased energy costs due to elevated load-shedding levels. The combination of these headwinds is weighing on profitability, which has resulted in weakened share price performances from most retail counters on the JSE."
Mayekiso said the Pick n Pay’s strategy was a step in the right direction in improving Pick n Pay’s competitive positioning in South Africa’s food retail landscape.
"Having a more targeted retail offering to different consumer demographics in South Africa is starting to yield some green shoots for Pick n Pay but the implementation of the Ekuseni strategy is still ongoing," she said.
Ackerman said Pick n Pay has absorbed much of the cost inflation, particularly on basic commodities by saving costs in its business while spending around R60 million per month on diesel.
He said that 37% of the cost of each litre of diesel was going into government coffers and the Road Accident Fund as a windfall tax, but requests by the retail industry to be included in the government’s diesel rebate package had so far fallen on deaf ears.
As a result, Ackerman said they could not insulate consumers entirely from the impact of the energy crisis, as no company could absorb these costs indefinitely, given the scale of the investment needed to keep the power on and stores open.
Bahlmann said business now had to make its voice heard on the global stage that it will solve South Africa’s problems, with or without government, just as ordinary citizenry were increasingly bypassing government in almost every area of life.
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Retailer Pick n Pay, which released its results this month and had spoken extensively about the impacts of load shedding on its performance, said it took the view that the power crisis was a permanent new reality.
“Our priority is to provide uninterrupted service for customers in our stores, whatever the level of load shedding. We will keep adapting our plans and our operations to keep our stores open and serving customers. We maintain our view that retailers should not be paying the levy on diesel used for generators," the group said.
Power crisis permanent new reality - Pick n Pay
https://www.iol.co.za/business-report/companies/power-crisis-permanent-new-reality-pick-n-pay-7b0785f8-25b3-4dd8-9275-5f48a9d1bc5d
Retailer Pick n Pay, which released its results this month and had spoken extensively about the impacts of load shedding on its performance, said it took the view that the power crisis was a permanent new reality.
“Our priority is to provide uninterrupted service for customers in our stores, whatever the level of load shedding. We will keep adapting our plans and our operations to keep our stores open and serving customers. We maintain our view that retailers should not be paying the levy on diesel used for generators," the group said.