Pick n Pay Stores Limited
Incorporated in the Republic of South Africa
Registration number: 1968/008034/06
JSE Share Code: PIK
ISIN code: ZAE000005443
(“Pick n Pay” or “the Group”)

Trading update for the 43 weeks ended 25 December 2022

Over the past 10 months, the Group has made excellent progress in implementing its Ekuseni Strategic
Plan, including implementation of the new customer value propositions (CVP) in Pick n Pay and Pick n
Pay QualiSave, accelerated rollout of the Boxer and Clothing growth engines, innovation and growth
in omnichannel, and momentum on the Group’s Project Future efficiency programme.

The Group has more recently had to contend with a significantly more difficult trading environment,
with unprecedented load shedding and a further downturn in the economy. Our priority has been to
provide an uninterrupted service for customers in our stores, whatever the level of load
shedding. Inevitably, load shedding has disrupted customers, with some impact on turnover. Of
greater consequence, however, are the substantial unplanned costs incurred in running localised
power generation for stores.

Group sales

Group sales for the first 10 months of the 2023 financial year (FY23), covering the 43-week period
from 28 February 2022 to 25 December 2022, increased 9.3%. South Africa sales growth for this 10-
month period was 9.0%, with like-for-like sales growth of 4.8%. The Group’s Rest of Africa segment
increased sales for the 10-month period by 17.0% (9.0% on a constant currency basis).

Group sales for the first 17 weeks of H2FY23, covering the period 29 August 2022 to 25 December
2022 increased 6.4%. South Africa sales growth for the 17-week period was 6.1% (2.0% like-for-like).
The Group’s Rest of Africa segment sales increased by 15.8% for the 17-week period (10.0% on a
constant currency basis).

Group clothing sales grew 11.0% for the first 10 months of FY23. Sales for the 17-week period grew
6.2%, ahead of peers in the value-fashion clothing segment. Importantly, sales in standalone clothing
stores (i.e. excluding supermarkets where clothing sales were disrupted by CVP upgrades) grew 11.4%
for the 17-week period. Group liquor sales for the 10 months period grew 22.7%, while sales for the
17-week period increased 9.8%.

South Africa sales

South Africa sales for the 17-week period was constrained by base effects, the disruptive impact of
accelerated CVP rollout, and a substantial increase in load shedding. October trade was particularly
soft (sales +3.3%) and was followed by improved November momentum thanks to a solid Black Friday
promotional campaign, and further improvement over December (+7.2%) as customers responded to
the Group’s seasonal product offering.

•   Pick n Pay South Africa sales grew 4.5% (3.8% like-for-like) in the 43-week period, and 3.2% (2.8%
    like-for-like) for the 17-week period. Sales growth in the 17-week period was impacted by a
    stronger base (lesser civil unrest impact in base compared to the first half of the year, and 11 lost
    liquor trading days in the base against 55 in the first half) as well as an increase in CVP store
    upgrades and store revamps (26 during the period).
•     Boxer South Africa sales growth was 20.7% (7.6% like-for-like) for the 43-week period and 13.1%
      (0.2% like-like) for the 17-week period. The deceleration in like-for-like sales growth in the latter
      part of the 43-week period was driven by a strong base associated with the impact of the July
      2021 civil unrest on Boxer’s promotional campaign timing in the base year. This has now
      normalised and Boxer SA sales have accelerated post period-end, with like-for-like sales for the
      month of January at 9.7%. Boxer has gained market share in 10 of the first 11 trading months of
      FY23.

South African internal selling price inflation for the 17-week period was restricted to 10.0%, below
12.2% CPI Food. Group selling price inflation was impacted by Boxer’s greater exposure to commodity
categories, where inflationary pressure has been highest.

                                                     43 weeks ended                      17 weeks ended
                                                        25 December                         25 December
                                                            % growth                            % growth
    Pick n Pay SA sales                                         4.5%                                3.2%
    Boxer SA sales                                             20.7%                               13.1%
    SA total sales                                              9.0%                                6.1%
    Rest of Africa sales                                       17.0%                               15.8%
    Group turnover                                              9.3%                                6.4%


Ekuseni Strategic Plan

The Group is making pleasing progress on each of the five pillars of its Ekuseni strategic plan:

•     We have fully converted 93 stores to the Pick n Pay QualiSave banner and are on track to convert
      130 Pick n Pay and Pick n Pay QualiSave stores to the full new CVP. Sales growth from stores fully
      converted is significantly higher than in non-converted stores, and averages an encouraging
      10.5%.

•     The Group is accelerating the rollout of its growth engines, with 44 Boxer stores and 58 standalone
      clothing stores opened this year, putting the Group on track to meet its FY23 store opening targets
      for these formats.

•     The new Pick n Pay on-demand grocery offer has been successfully launched on the Mr D app, and
      is now available across the country, alongside the existing Pick n Pay asap! offer. Sales growth
      across all online platforms is a strong 69.6% year-to-date, with on-demand year-to-date growth in
      excess of 100%.

•     The Group is on-track to deliver its targeted efficiency savings for FY23 across its store operations,
      support offices and supply chain, and is fully focused on delivering its target R3 billion over three
      years.

•     Multitasking of colleagues in Pick n Pay stores is being implemented, delivering better customer
      service and greater productivity.

Impact of load shedding

The ongoing crisis in national electricity generation is having a profound impact on every part of
society and the economy.
All Pick n Pay and Boxer stores have backup power and are operational throughout load shedding.
However, severe load shedding creates significant challenges. Customer demand is dampened as a
result of disruption, inconvenience, and a concern that food may spoil due to interruptions to power
at home. The production of food and other goods is disrupted, creating stock challenges. Diesel
generators are not designed to run for many hours on end and suffer breakdowns.

Above all, the generation of emergency, localised, electricity supply is a severe cost to the Group. The
Group spent an additional R346 million year-on-year on diesel to run generators at stores in the first
10 months of the year, with the costs concentrated over the latter months, and is currently on a run
rate of approximately R60 million per month, depending on the stage of load shedding experienced.
In addition to the above, the Group is experiencing increased generator repairs and maintenance costs
and some additional food waste costs.

The Group previously guided the market to expect broadly flat FY23 earnings (against the FY22 pro
forma earnings base) and guided in its interim result in October that external headwinds, including
unprecedented load shedding, would have an additional impact on the full-year result. There has been
a further escalation in load shedding since then, resulting in the additional cost pressure outlined
above. The Group is working exceptionally hard to mitigate as much as possible of the additional cost
pressure.

Confronting the new reality

The government needs rapidly to come forward with a sustainable plan to solve the electricity crisis,
including by taking every step possible to ease the way for businesses to generate and use their own
sustainable energy.

It is clear that progress will not be rapid. The Group therefore takes the view that the current crisis is
a permanent new reality, requiring a rapid, determined and concerted response. We are determined
to be on the front foot in adapting our Ekuseni strategic plan and our operations successfully to the
new reality.

More details will be set out when the Group reports on its full-year financial results. However, among
the key steps on which we are currently focused are:

1. An energy resilience plan, comprising various facets:

        a. The Group has made great progress over the past decade in reducing energy consumption
           per trading floor area by 35.1% in its Pick n Pay corporate stores, against our 2009
           baseline. We will now redouble these efforts, looking across air-conditioning and
           refrigeration, food preparation, lighting and other uses of electricity to reduce usage
           further, without unduly impacting customer service.
        b. Negotiations with landlords to ensure that they enable us to maximise installation of solar
           electricity on the roofs of our stores or allocate us a fair share of renewable electricity that
           they generate.
        c. Installing inverter and battery power solutions to operate supermarkets sustainably
           through load shedding. The Group will have trial supermarkets operational in the coming
           weeks. All of our standalone corporate clothing stores already have power backup, with
           more than half of these on inverter and battery power.

2. Depending on the energy options pursued, the Group may need to reprioritise other demands for
   capital investment. In this event, priority will continue to be given to funding expansion of the
   Group’s Boxer and Clothing growth engines, which are likely to deliver the best combination of
   sales growth and sustainable returns in the coming years. The Group will reappraise the phasing
   of its CVP rollout plan to ensure maximum uplift in performance from allocated capital.
3. The Group also intends to accelerate growth opportunities that are less directly disrupted by
   interruptions to infrastructure. We will accelerate our digital ambitions, including new initiatives
   in omnichannel retailing and digital media, alongside plans to step change our market-leading
   Smart Shopper loyalty programme.

In summary, the Group is fully focused on the successful delivery of its strategy. Shareholders should
draw confidence from the excellent progress achieved to date in executing our Ekuseni strategic plan,
the underlying strong performance across our various operating divisions, and the proactive steps we
are taking to succeed despite more challenging circumstances.

FY23 result announcement
Shareholders are advised that the Group plans to release its financial results for the 52 weeks ended
26 February 2023 early in May 2023, followed by an online results presentation. Further details will
be provided in due course.

Pro forma information
The pro forma constant currency information is presented in accordance with the JSE Listings
Requirements and is presented for illustrative purposes only. The pro forma financial information may
not fairly present the Group’s financial position, changes in equity, results of operations or cash flows.



The financial information on which this trading update is based is the responsibility of the Board of
directors of the Group and has not been reviewed by or reported on by the Group’s external auditors.


By order of the Board
Cape Town
8 February 2023                                                    Sponsor: Investec Bank Limited