Pick n Pay Stores Ltd. said first-half profit climbed 6.2 percent as South Africa’s second-biggest grocer cut costs, added new stores and stemmed market share losses. The shares gained the most in more than a month.
Net income increased to 192 million rand ($19.5 million) in the six months through August, compared with 180.4 million rand a year earlier, the Cape Town-based company said today in a statement. Earnings per share excluding one-time items gained 14 percent to 40.81 cents, while sales rose 6.2 percent to 30.1 billion rand.
“I’m encouraged, but far from satisfied — we can do better,” Chief Executive Officer Richard Brasher said in a presentation in Cape Town. “We are determined to control our costs and invest in growth.”
The retailer is working to regain market share from competitors such as Shoprite Holdings Ltd. (SHP), Africa’s largest grocer, and has been trying to reduce costs and improve its supply chain amid a downturn in consumer confidence. The outlook for South African household spending remains uncertain as high wage settlements are counterbalanced by low employment, high debt levels and rising prices, Reserve Bank Deputy Governor Francois Groepe said on Oct. 11.
More Headwinds
Pick n Pay will open 64 new stores in the second half, Brasher said in the presentation. That compares with 44 new outlets opened across all formats during the first six months of the year, alongside nine closures. While the company has faced “a few more headwinds than perhaps this time last year,” it stemmed some losses in market share, Brasher said.
Like-for-like till sales growth was 4 percent in the first half, compared with 3.2 percent in the same period a year ago. That’s a “strong indication” market shares losses are being eroded, the company said.
Pick n Pay shares gained as much as 5.4 percent, the most since Sept. 20, and traded 4.2 percent higher at 44 rand as of 9:44 a.m. in Johannesburg. About 1.3 million shares traded, or almost twice the three-month daily average.
Brasher, the former head of Tesco Plc’s (TSCO) U.K. unit, joined the retailer in February to lead a sales-growth revival. The company said in August it may cut management jobs as it seeks to lower operating costs.
