JOHANNESBURG (Reuters) – Pick n Pay Stores Ltd, South Africa’s No.2 grocer, reported a 32 percent rise in half-year profit on Thursday as cost cuts helped offset sluggish sales growth.
Once a darling of investors and customers, Pick n Pay is in the middle of a turnaround plan that includes slashing costs and streamlining its supply chain while still opening new stores after losing ground to peers such Shoprite Holdings
“A determined focus on cost control and operating efficiency is strengthening our business and is continuing to drive our profit growth in a challenging trading environment,” the company said in a statement.
Pick n Pay said headline earnings per share totalled 53.98 cents in the six months ended Aug. 31 compared with 40.81 a year earlier. Headline EPS, the main profit measure in South Africa, strips out certain one-off items.
But sales growth – at about 7 percent – was at least two times slower than the bottom line, an indication that much of the increase in profit came from cost cuts which include reducing staff and dropping consultants.
The muted sales growth highlights an industry-wide downswing as rising electricity prices, increasing interest rates and high personal debt levels hit consumer spending.
Shoprite warned of a continuing squeeze on the country’s consumers after posting its slowest profit growth in 15 years in August.
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