Pick n Pay sales grow but warns on extra costs from power cuts

Source: Reuters/Siphiwe Sibeko/File Photo

At market open, shares of Pick n Pay, South Africa's second-biggest supermarket chain, fell 5% to R49.63, as it also warned on additional cost pressures.

The company launched an investment plan earlier last year to better target its stores by customer incomes, modernise their look, and add more shops.

That plan, plus a substantial increase in power cuts, disrupted South African sales as like-for-like sales grew by just 2% in the 17 weeks ended 25 December, with selling price inflation of 10%, it said. Overall sales grew 6.1%. Over 10 months ended 25 December, group sales increased by 9.3%.

Load shedding impact on turnover

"The group has more recently had to contend with a significantly more difficult trading environment, with unprecedented load shedding and a further downturn in the economy," the retailer said.

"Inevitably, load shedding has disrupted customers, with some impact on turnover. Of greater consequence, however, are the substantial unplanned costs incurred in running localised power generation for stores."

Pick n Pay said it spent an additional R346m year-on-year on diesel to run generators in the first 10 months of its financial year and is currently on a run rate of approximately R60m per month.

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The group previously guided the market to expect broadly flat annual earnings and said in October that external headwinds, including power cuts, would have an additional impact on its results, which it will announce in May.

"There has been a further escalation in load shedding since then, resulting in the additional cost pressure," it said.

Its bigger rival Shoprite reported a 16.8% jump in half-year sales.