CFO Lerena Olivier: Pick n Pay successfully navigated the challenges of Covid-19

The Covid-19 trading restrictions and lockdown affected up to 20 percent of the retailer’s revenue.

Pick n Pay has released its results for the six months ended 30 August 2020, stating a 2.6 percent increase in group turnover.

The group’s first-half performance commenced on 2 March, two weeks before a National State of Disaster was declared in South Africa, with a nationwide lockdown imposed from 27 March. “Trading restrictions, implemented by the government to slow the spread of Covid-19, impacted up to 20 percent of our revenue, including our higher-margin liquor, clothing and general merchandise categories,” says PnP CFO Lerena Olivier.

She explains that the results reflect the sales and gross profit margin impact of these restrictions, alongside the impact of store closures and additional Covid-19 operating costs, including hygiene, safety and security costs to protect the wellbeing of its customers, staff and service providers, and appreciation bonuses paid to its colleagues on the front line.

“This has been a unique result for us, given that almost our entire first half fell within the national lockdown period,” says Lerena. “I am extremely proud of what we have achieved against a background of unprecedented challenges.”

She explains that the turnover from PnP’s South African operations increased 3.4 percent, with its core food and grocery sales (excluding the restricted categories of liquor, tobacco and clothing) up 9.9 percent. “This performance demonstrates the underlying strength of our customer offer, and how we have met our customers’ increasing need for essential food and groceries at great value.”

According to its results presentation, the group also successfully pursued two primary goals over the period: “feeding the nation in a safe and reliable way as an essential provider of food and groceries, and delivering on our long-term plan to build a leaner, more agile and more modern business, attuned to the needs or our customers”.

Lerena says that PnP has also shown firm cost-discipline in the business, bolstered by Project Future, which is on track to deliver R1 billion in savings over two years. “We also grew our online business by increasing our delivery capacity, our Click n Collect offer, and by repositioning our partnership with Bottles, the on-demand liquor app, to deliver groceries to customers’ homes same day.”

She adds that the group’s investment in its digital platform and mobile technology has delivered double-digit growth in online sales each year for the past five years. “This provided the group with a keen competitive advantage going into the Covid-19 crisis, as we were able to respond quickly and effectively to the surge in demand for online shopping.”

She also explains that the acquisition of Bottles puts the company in a very strong position to bring this on-demand app and its possibilities in-house and give it further attention to grow. “It will put us in a much stronger position to capitalise on the changing trends of online shopping.”

Lerena says that, over the past six months, the group has managed its cash and liquidity in a measured and effective way. As a result, the board has declared the FY20 final dividend which had been deferred in May 2020, and has also declared an FY21 interim dividend, returning to the cadence of bi-annual dividend pay-outs to shareholders.

Looking into the future, Lerena explains that PnP has been successful in navigating the challenges of the Covid-19 lockdown, and is well-placed to serve its customers effectively during its second half. “Our core retail growth for the period demonstrates that, in the South African retail market, you can be successful if you remain customer-focused, and meet the increasing need for lower prices and greater value.”

She says that future plans include further investment in low prices, productivity improvements in store and supply chain operations, expanding its reach to all customers across its store formats, including through its online and on-demand platforms. “Through our long-term plan and other measures we are putting in place, the group is well-positioned for the future, whatever the economic circumstances, and we are looking forward with confidence.”