SOUTH AFRICA – Pick n Pay expects its full-year earnings to increase by as much as 30%, supported mainly by cost cuts.

The retailer said on Friday that it expected to deliver a “strong financial performance” for the 2015 financial year. In the 52 weeks ended March 1 2015, diluted headline earnings per share were seen rising between 20% and 30% to a range between 80.56c and 87.27c.

The group said this would be the fourth consecutive reporting period of growth.

“This result reflects progress over the past two years in achieving the first phase of the group’s recovery plan — to stabilise the business by applying effective financial rigour to expenditure, making significant improvements to working capital management to reduce debt and interest charges, and beginning the task of driving greater efficiency through all operations,” the company said.

Once a darling of investors and customers, Pick n Pay has lost ground to rivals such as market leader Shoprite Holdings in the last few years after failing to invest in new stores and supply chains and paying out much of its profit as dividends.

The company has been cutting costs, including shutting 40 stores under a turnaround strategy initiated two years ago when Richard Brasher, former UK head of Tesco, took over as CEO.

On Friday the retailer said it expected growth to have grown by 6.1% reflecting “the financial pressure on middle-income customers, combined with the impact of strategic actions which … impacted turnover in the reporting year”.

Year rolling, Pick n Pay Holdings’ share price is up 6.55%, while Pick n Pay Stores has grown 4.55%.

The muted sales growth highlights a downswing across the retail industry as a result of rising electricity prices, higher interest rates and high personal debt levels which have hit consumer spending.

At 10.30am on Friday, Pick n Pay Holdings had rallied 4.4% to R23.50.

Looking ahead, the group said having substantially completed the first stage of its strategic recovery plan, it was now a stronger business and better for customers.

“The second stage of the plan — changing the trajectory of Pick n Pay — will deliver accelerated improvements in operating efficiency, investment and innovation in the customer offering, a further strengthening of the balance sheet and financial performance, and a dynamic approach to expansion,” said the retailer. – With Reuters

April 10, 2015;