Retailer Pick n Pay has seen a surge in its online sales, propelled by its tie-up with e-commerce giant Takealot.
However, the retailer is reeling from load-shedding and has spent hundreds of millions of rands to mitigate the effects.
This emerged when Pick n Pay today announced its financial results for the year ended 26 February.
In a statement, the retailer says the group delivered an encouraging performance despite the substantial impact of load-shedding and related costs, particularly in the second half of the trading year.
On the online sales front, it says the group “was very encouraged by online sales growth of 72%, with on-demand sales growth well in excess of 100%”.
It explains this was driven both by asap! and the new Pick n Pay offer on Mr D, in partnership with Takelot.
In October 2022, Pick n Pay concluded a commercial services agreement with the Takealot Group, which saw the launch of a dedicated Pick n Pay on-demand food, grocery and liquor offering on the Mr D app, which has over 2.5 million active customers.
At the time, it said the goal of the four-year plan was to deliver group turnover growth at a compound annual rate of 10% – resulting in market share growth for the group of at least 3%.
“Online sales growth for the year was accelerated by the launch of Pick n Pay’s food and grocery offer on the Takealot Group’s Mr D app,” says the retailer in its results.
It notes this offer grew from a limited number of stores in early October, to a nationwide offer by the end of the year.
“The offer benefits from a synergistic combination of Pick n Pay’s extensive store network, stock-management system, fresh product offering and in-store picking experience, and Mr D’s strengths in user-interface design, a 2.5 million active customer base and a delivery fleet of 15 000 scooters,” the retailer says.
“The group is working on improvements to its scheduled delivery service, to provide customers with wider choice and greater flexibility on delivery.”
Load-shedding pain
Meanwhile, Pick n Pay laments that the ongoing crisis in national electricity generation is having a profound impact on the group and the country as a whole.
According to the firm, all Pick n Pay and Boxer stores have backup power and are operational throughout load-shedding.
However, it notes load-shedding results in customer disruption, supply chain and procurement challenges, significant diesel expenditure costs to run generators, extra repairs and maintenance on generators running ahead of normal demands, and product spoilage in instances when generators break down and cannot be immediately replaced.
Diesel cost to run generators is the most significant challenge, says the retailer.
“The group spent an incremental R522 million on diesel costs to run generators in FY23, resulting in net incremental energy costs of R430 million, after taking R92 million of associated electricity savings into account.”
The company says it is working exceptionally hard to mitigate as much as possible of the additional cost pressure.
Says Pick n Pay CEO Pieter Boone: “This result is a respectable achievement by Pick n Pay and Boxer colleagues in an exceptionally tough year.
“Like everyone in South Africa, we have had to manage substantial inflationary cost pressures, exacerbated by an unprecedented worsening of load-shedding.
“Load-shedding has had a material impact on our results, particularly through massive increases in diesel costs. We are accelerating our energy resilience plan to mitigate these costs in the future.”
Solar switch
Amid the energy crisis, Pick n Pay plans to maximise the usage of landlord-supplied solar. According to the firm, negotiations with landlords are ongoing in support of maximising landlord solar installation and the purchase of renewable electricity from landlords.
The other plan is installing in-store battery energy storage solutions to operate supermarkets sustainably through load-shedding.
The group is in the process of trialling such solutions in a number of supermarkets and will critically assess the return on investment on these initiatives.
Pick n Pay is targeting FY24 diesel cost savings of at least R200 million.
“With respect to capital investment, the group is prioritising energy cost mitigations in FY24 that do not require investment (ie, reducing the energy load in stores during load-shedding), or which are limited in cost, yet have a proven record of quick and sustainable returns; eg, LED lighting,” it says.
Gareth Ackerman, chairman of Pick nPay, adds: “It has been an extraordinarily challenging time. Blackouts haveplaced the economy under enormous pressure. South Africa is simply not growingat the required rate to ensure improvements in employment and living standardsfor all South Africans. We need to grow the size of the cake before we try to cut it differently.”
According to Ackerman, the energy crisis is particularly challenging for food retailers because they rely on electricity to keep food chilled and safe.
“Shockingly, 37% of the cost of each litre of diesel we have bought – over half a billion rands worth – has gone into government coffers and the RAF [Road Accident Fund] as a windfall tax.
“This is unconscionable, particularly when rolled up across the economy and the hardship the blackouts are causing. Requests by the retail industry to be included in government’s diesel rebate package have so far fallen on deaf ears,” Ackerman concludes.
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