Fri, 22 Nov 2019

Pick n Pay [JSE: PIK] posted a 9.5% increase in headline profit (excluding hyperinflation gains in Zimbabwe) on Tuesday morning.

Its share price jumped more than 8% to R66.47 in the first hour of trading.

Its comparable turnover was up 6% to R43.1 billion. In South Africa, prices at its stores rose by 2.2% compared to the same period last year. This is a reversal from the year to March, when Pick n Pay's prices fell by 0.3%. Pick n Pay stressed that the 2.2% rise is still below food price inflation. Annual food inflation reached its highest level in 18 months, registering 3.8% in August, according to Statistics SA.

Under new CEO Richard Brasher, a former Tesco exec, Pick n Pay has competed aggressively on price. This has helped the chain gain market share after it lost customers in recent years. It also reduced its labour force by a tenth and streamlined operations, investing in logistics and new stores.

Tighter margin management and improved efficiency helped to deliver a 16.4% increase in underlying trading profit in South Africa, the group said.

It launched more than 320 new own brand products this year, which now represent more than a fifth of sales in specific categories. Two million customers visited Pick n Pay's online shop, with sales growth of 17%. Some 850,000 of its customers have joined its partner bank TymeBank.

The group (which includes Boxer) opened 63 net new stores, and now has more than 1,800 stores, including 744 franchise stores. "As customers increasingly value greater convenience and more tailored ranges, our Pick n Pay and Boxer supermarkets are on average smaller in size than in the past."

"Our Pick n Pay and Boxer stores now appeal across a very broad range of incomes, preferences and communities. This has positioned the Group well to identify and pursue opportunities for growth in a dynamic and sustainable way within a persistently low-growth economy."

But Pick n Pay saw an 80% slump in its profit from stores in the rest of Africa, with hyperinflation in Zimbabwe hitting it particularly hard.

An interim dividend of 42.80c per share has been declared, up 9.5% on last year.

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