Pick n Pay counts cost of unrest and booze restrictions

Source: Pick n Pay

Across the whole first half, group turnover increased 4.1% year-on-year to R46bn, and estimated normalised sales growth, excluding the impact of disruption, is 8% for the period.

The group’s liquor business lost a further 55 trading days during this period, as a result of the restriction of off-site alcohol sales in response to the Covid-19 pandemic. These restrictions, which relaxed today as SA entered Level 1, resulted in an estimated R800m of lost sales over the period.

Civil unrest

The civil unrest cost the group material damage losses (comprising stock and assets) of approximately R900m. These losses were fully covered by the group’s Sasria insurance policies, and Pick n Pay has to date received R600m in interim payments.

In addition, the group expects to recover the majority of all related lost profits under its business interruption insurance covers, subject to relevant policy limits and deductibles. The company stated that although it is not yet possible to quantify the full impact of the business interruption on sales and earnings, the group estimates that it resulted in approximately R930m of lost sales over the months of July and August.

The group said it has submitted its material damage claims to insurers and has made "good progress" in estimating its lost profits to date. "Insurers have provided assurance around their financial ability and commitment to settle outstanding claims in the market, and loss adjustors have provided assurance around the validity and quantum of the group’s claims," Pick n Pay said.

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Stores and distribution centres impacted

During the unrest, 212 stores – 112 Pick n Pay and 100 Boxer – were damaged by looting and destruction, with many stores requiring extensive restoration before reopening. The group had reopened 145 (close to 70%) of these damaged stores by the end of August, with a further 18 stores reopened in September. As well as damage to stores,

Pick n Pay’s two largest distribution centres in KwaZulu-Natal were looted of all stock and suffered considerable damage to infrastructure. Both of these distribution centres were repaired, restocked and operational within two weeks.

At the height of the unrest, the group closed an additional 551 stores (417 Pick n Pay and 134 Boxer) as a precautionary measure to protect staff and customers. The majority of these stores reopened within four days, and all were trading by the end of July.

"The swift and heroic response of our teams during and after the civil unrest and looting enabled a rapid restoration of retail operations in most of the affected areas. This was vital in maintaining food supplies, social welfare and public morale at a very critical time. We express our sincere thanks to our extraordinary Pick n Pay and Boxer teams, and to our highly-valued franchisees, suppliers and service providers, who worked so tirelessly to rebuild and restore," Pick n Pay said.

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A "resilient" performance

Despite severe trading and operational disruptions in the second quarter of the financial year, Pick n Pay said the group delivered a "resilient and positive performance", maintaining underlying momentum on sales and earnings growth.

The group said that normalised sales growth of 8% year-on-year (excluding the estimated impact of the disruptions) reflects solid progress against a number of the group’s strategic priorities – including another market-leading sales performance by Boxer, better value for customers across Pick n Pay and Boxer and progress in growing Pick n Pay’s omnichannel offer.