Pick N Pay Stores Ltd (STU:PIK) Full Year 2025 Earnings Call Highlights: Strategic ...

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Tue, May 27, 2025, 1:01 AM 4 min read

Turnover Growth: 5.6% increase on a 53-week basis; 3.2% on a 52-week basis.
Group Loss Before Tax: ZAR 736 million, an improvement of ZAR 2.6 billion from last year.
Pick n Pay Trading Loss: Reduced by two-thirds to ZAR 0.5 billion from ZAR 1.5 billion last year.
Like-for-Like Sales Growth: Owned stores at 3.6% in H2; Franchise stores at 1.1% in H2.
Omnichannel Sales Growth: Up 46% on a like-for-like basis.
Pick n Pay South Africa Turnover: ZAR 71 billion, despite closing 40 loss-making stores.
Boxer Turnover Growth: 10.4% increase on a 52-week basis.
Gross Profit Margin Improvement: 120 basis points in H2.
Trading Expenses: Down 2.2% for the year.
Cash Burn: ZAR 2.6 billion in free cash flow utilized.
Capital Raise: ZAR 12.5 billion raised, settling all Pick n Pay debt.
CapEx Investment: ZAR 1.5 billion in FY '25; forecasted ZAR 1 billion for FY '26.
Headline Earnings Per Share: Improved by 64%.
Net Cash Position: ZAR 4.2 billion, a delta of ZAR 10.3 billion from last year.

Warning! GuruFocus has detected 7 Warning Signs with STU:PIK.

Release Date: May 26, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

Pick N Pay Stores Ltd (STU:PIK) successfully recapitalized the business, raising ZAR12.5 billion and settling all debt, resulting in a net cash position of ZAR4.2 billion.
The company achieved a significant improvement in trading profit, with a ZAR1 billion increase in the Pick n Pay segment and a reduction in net funding interest by ZAR166 million.
Pick N Pay Stores Ltd (STU:PIK) reported a strong performance in its Boxer segment, with a 10.4% turnover growth and a 19.7% increase in trading profit.
The company saw a 46% increase in omnichannel sales, supported by growth in both asap! and Mr D platforms.
Pick N Pay Stores Ltd (STU:PIK) improved its gross profit margin by 120 basis points in the second half of the year, driven by better product mix and reduced waste.

Negative Points

Despite improvements, Pick N Pay Stores Ltd (STU:PIK) recorded a group attributable loss before tax of ZAR736 million, although this was an improvement from the previous year.
The company experienced a cash burn of ZAR2.6 billion, which is expected to continue, albeit at a reduced rate, as operational improvements take time.
Franchise sales growth has been slower to recover compared to company-owned stores, with only a 1.1% like-for-like growth in the second half.
The closure of 40 loss-making stores impacted turnover, although the company managed to maintain ZAR71 billion in turnover.
Pick N Pay Stores Ltd (STU:PIK) faces challenges in a low inflation environment, which can be difficult for retailers to navigate.

Q & A Highlights

Q: How were the transactions structured for the stores that were closed or converted to Boxer, and were there any costs for Pick n Pay? A: Lerena Olivier, CFO, explained that the restructuring of stores involved some once-off costs, including staff restructuring and lease settlements. However, these costs were largely offset by profits on lease terminations under IFRS 16, so there was no significant impact on the results.

Q: Could you elaborate on the vision for future Pick n Pay stores and how they will differentiate from competitors? A: Sean Summers, Non-Executive Director, emphasized the focus on returning Pick n Pay to being the "fresh food people." He highlighted the importance of evolving the store experience, particularly in fresh food, to attract customers, drawing inspiration from successful models like Wegmans in the U.S.

Q: Can you update us on the strategy for the hypermarkets, given their larger size compared to competitors? A: Sean Summers noted that the ideal size for hypermarkets is about 8,000 square meters. He mentioned ongoing efforts to rightsize and redevelop hypermarkets, such as the Faerie Glen hypermarket, to align with this strategy.

Q: How do you see food inflation trends affecting the business over the next 12 months? A: Sean Summers acknowledged that lower inflation rates can be challenging for retailers, but emphasized that Pick n Pay has managed such cycles before. He noted that the company is now in a better position with cash back on the balance sheet, which helps mitigate some challenges.

Q: What is the outlook for cash burn in the coming years, considering the breakeven targets have been pushed out? A: Lerena Olivier stated that while formal cash burn guidance is not provided, several factors, such as the elimination of interest costs and improved working capital, will positively impact cash flow. The aim is to reduce cash burn significantly over time.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.

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