Pick n Pay Stores Limited Reports Decline in Sales and Plans for Recapitalization

  • Pick n Pay Stores Limited reports sales decline: -0.1% growth in Pick n Pay supermarkets, +17.1% in Boxer.
  • Company plans two-step recapitalization: rights offer and Boxer IPO to stabilize balance sheet and unlock shareholder value.
  • Expectation of over 20% decrease in earnings for FY24 attributed to weak supermarket performance and operational challenges.
Load Shedding Woes

Pick n Pay Stores Limited has released its sales and balance sheet update for the 47 weeks ending January 21, 2024, along with a further trading statement for the full 2024 financial year. The company reported a total sales increase of +5.3% during the period, with like-for-like sales growth at +2.9%. However, the performance of Pick n Pay supermarkets fell below expectations, leading to a decline in sales.

Here’s a breakdown of the sales performance:

SegmentGrowth (%)
Pick n Pay-0.1
Boxer+17.1
Pick n Pay Clothing+17.5
Rest of Africa+10.3
Group Sales+5.3

Balance Sheet Update and Discussions with Lenders

The disappointing performance of Pick n Pay supermarkets, coupled with increased inventory levels and strategic investments, has resulted in a significant increase in the company’s net debt. However, there was a slight improvement in February 2024 due to cash proceeds from property sales. Pick n Pay actively engaged with lenders to ensure compliance with long-term debt covenants, obtaining waivers to address the current challenges.

Further Trading Statement

The company expects its earnings for the financial year ending February 25, 2024, to decrease by more than 20% compared to the previous year. This projected loss is primarily attributed to the weaker performance of Pick n Pay supermarkets, along with other operational factors. Management plans to finalize the financial results over the coming weeks, with publication scheduled for late May 2024.

Strategic Response and Cautionary Announcement

In response to the challenges faced, Pick n Pay appointed a new CEO in October 2023 to address the underperformance of its supermarkets and evaluate strategies to unlock shareholder value. The board approved a two-step recapitalization plan, including a rights offer and an IPO for the Boxer business. This plan aims to stabilize the company’s balance sheet, strengthen liquidity, and unlock shareholder value. While the terms and conditions are still being developed, the board believes this is the best course of action to address the current situation.

FY24 Financial Results Announcement and Strategic Update

The company plans to release its financial results for the 52 weeks ending February 25, 2024, in late May 2024. Alongside the financial results, an update on the company’s strategy and plans to raise capital will be provided.

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