Pick n Pay reports 7% growth in net profit as a result of cost-cutting initiatives

SOUTH AFRICA – Pick n’ Pay, the second largest supermarket chain store in South Africa has reported almost 7% growth in net profit as a reward from cost-cutting programme and a steady 5% increase in sales, reported BusinessDay from a statement.

“The group’s muted turnover growth reflects the pressure of an exceedingly challenging trading environment, particularly over the first three quarters of the year.

However, the positive steps taken by the group to invest in its customer offer found traction in the final quarter of the year, with a stronger trading performance across all formats.”

The grocery retailer said the cost-cutting included reducing its employee numbers by 10% through a voluntary severance programme that cost US$20.9 million during the 52 weeks to February 25.

According to CEO Richard Brasher, the retailer managed to keep its average selling price inflation in check, limiting it to 2.2%, down from 6.1% in 2017 below official food inflation of 5.9% as reported by Statistics SA’s consumer price index.

Pick n’ Pay operates 1,685 stores including 57 Zimbabwean stores owned by its TM Supermarkets joint venture, having added 125 more in 2018 financial year.

It not only focused on home grown stores and franchises for its market but also grew into the rest of Africa, adding 4 more stores to bring its total number of stores outside South Africa to 144.

The company operates a number of other stores in Botswana, Lesotho, Namibia, Swaziland and Zambia.

Operations outside South Africa contributed US$385.01million of segmental revenue, 9.3% in constant currency terms despite of difficult trading conditions in some of the regions.

Although turnover growth was weighed down by tough trading environment in Zambia, it was offset by stronger operational efficiency and tight cost control.

“Notwithstanding the challenges in Zambia, the group remains confident about its long-term prospects and will continue to build scale in the region and drive growth through a competitive customer offer,” continued the statement.

Business Day said the number of franchised Pick n Pay stores remained level at 299, with seven new store openings balancing seven closures.

Describing itself as a ‘Leaner and fitter’, Pick n Pay said its headline earnings per share increased by 7.1% to 276.98 cents in the 52 weeks ended February 25, 2018.

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