Pick n Pay expects first-half profits to halve

Retailer Pick n Pay warned on Tuesday its first-half profits could halve as it grapples with the fallout from Covid-19.

Trading restrictions on items such as alcohol and tobacco, increased staff costs and a voluntary severance programme all weighed on the group, which expects comparable headline earnings per share (Heps) to end-August to fall more than 50%.

Heps is a widely used profit measure in SA that strips out certain one-off items, while the group also adjusts for other items, such as hyperinflation in Zimbabwe, to give a comparable performance of its stores.

The group said 1,400 staff had left after it initiated a voluntary severance programme in March. At the beginning of March, the group had about 90,000 employees. Pick n Pay faced other costs, including protective gear for employees, while it had paid a R1,000 bonus for some of its front-line staff.

“We have prudently and carefully preserved our cash through tight working capital management and a keen focus on critical capital and operational spend,” said CEO Richard Brasher.

“I want shareholders to understand and be reassured that the impact on our first-half earnings that we are announcing today derives solely from the specific circumstances of the pandemic, the impact of measures taken by government and ourselves to mitigate it, and the once-off costs of our voluntary severance programme which has made the group leaner and more competitive,” Brasher said.

“Our business remains strong and stable, and well-placed to serve customers and shareholders in the future,” he said.