Pick n Pay Stores Ltd.’s shares plunged in Johannesburg as South Africa’s third-largest grocer by revenue reported earnings that were crimped by extra costs to keep fresh food chilled amid nationwide power outages.
(Bloomberg) — Pick n Pay Stores Ltd.’s shares plunged in Johannesburg as South Africa’s third-largest grocer by revenue reported earnings that were crimped by extra costs to keep fresh food chilled amid nationwide power outages.
The company’s shares fell as much as 9.5%, the biggest intraday drop in almost seven months. That compares with a 1.9% decline in the FTSE/JSE Personal Care, Drug and Grocery Stores Index. The company reported earnings and a dividend that both missed analyst estimates.
South African companies ranging from miners to food producers are grappling with the worst power cuts on record. Pick n Pay estimates it will spend an additional 1 billion rand ($55 million) on diesel alone in the 12 months ending Feb. 26, almost double from the previous year. The blackouts — locally known as load-shedding — are likely to fuel inflation and shave 2 percentage points off growth this year, according to the nation’s central bank.
“The company provided very cautious earnings guidance,” Sean Holmes, an analyst at RMB Morgan Stanley, said in a note to clients. Pick n Pay’s fiscal 2024 earnings may be lower than the “pro-forma headline earnings” from last year, depending on the impact of the energy crisis among other reasons, he said.
For Pick n Pay, these outages come as the Cape Town-based company is also trying to significantly cut costs.
While the first year of its target to cut 3 billion rand of costs over three years is on track, the company is implementing that plan “in the face of considerable headwinds, which we’re trying to mitigate,” David North, Pick n Pay’s executive for strategy, said in an interview Thursday.
“If anybody is really badly affected by load-shedding, it’s going to be the food retailers, because we rely on electricity a lot to keep food fresh and chilled,” he said. Even as the company is “committed to rolling out the plan,” it “requires us to keep calm as we’re doing it and to stay determined.”
Pick n Pay opened 60 stores that focus on selling low-cost food and expects to have 200 of these Boxer outlets by February 2026, enabling it to double sales from this brand.
The company declared a dividend of 1.85 rand a share. That compared with the 1.92-rand median estimate of eight analysts surveyed by Bloomberg. Pick n Pay has proposed a reduction in dividend payout, using the proceeds to open more outlets and modernize stores.
The company’s profit fell 3.7% to 1.17 billion rand, while sales rose 8.9% to 106.6 billion rand.
The stock was 6.4% lower by 11:19 a.m. local time, declining for a third day.
–With assistance from Mpho Hlakudi, James Cone and Khuleko Siwele.
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