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Published
Oct 13, 2015
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South Africa's Pick n Pay H1 profit jumps 24 pct

By
Reuters
Published
Oct 13, 2015

South Africa's Pick n Pay Stores plans to sell more of its own brand products in a bid to speed up sales growth and boost profit further.

The retailer posted a 24.2 percent rise in profit in the six months to the end of August, mostly due to cost cuts, boosting headline earnings per share (EPS) to 32.94 cents from 26.51 cents a year earlier. Sales rose 8.5 percent to 34.9 billion rand, outpacing a 6.1 percent increase last year.



"We probably haven't seen the sales-lead recovery that we talked about some two-and-a-half years ago," said Chief Executive Richard Brasher.

He said, however, that momentum had improved in the first half and the company was now seeing growth in like-for-like sales, as well as sales at new stores.

Shares in Pick n Pay were up 3.66 percent at 63.39 at 1251 GMT outperforming a 1.2 percent fall in the Johannesburg Securities Exchange's General Retailers index.

Headline EPS is the main profit measure used in South Africa and strips out certain one-off items.

Pick n Pay plans to increase the share of its own branded products, which account for about 15 percent of sales, to boost profit further.

"I see no reason for it not being 30 percent," said Brasher adding that the initial focus would be on moving fresh goods through its centralised distribution centres. "We're playing catch-up on supply chain compared to Shoprite."

Pick n Pay faces stiff competition from the likes of Shoprite at the lower end of the market and Woolworths among more well-to-do shoppers.

Consumers in Africa's most advanced economy are tightening their belts amid rising interest rates, higher energy costs and the first income tax hike in more than a decade.

"I love being in the middle. We just need to get our elbows out," said Brasher.
Pick n Pay plans to claw back market share by keeping price rises low - they were only about half South Africa's inflation rate during the first half - and by opening new stores.

The retailer opened 83 new stores and refurbished 27 during the period, most of which now operate at a lower cost.

"Operational improvements include faster checkouts, Wi-Fi connectivity and automatic ordering and replenishment," the company said in a statement.

Pick n Pay is expanding cautiously into the rest of Africa, which accounts for about 12 percent of its operations. It plans to open three new stores in Zambia in the next year and its first store in Ghana in 2016.

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