Strikes take big bite out of Pick n Pay

South Africa's second-biggest grocery retailer Pick n Pay Stores posted an 18.4% decline in full-year profit yesterday, missing expectations, as higher costs and labour strikes bite.

SOUTH Africa's second-biggest grocery retailer Pick n Pay Stores posted an 18.4% decline in full-year profit yesterday, missing expectations, as higher costs and labour strikes bite.

Pick n Pay said diluted headline earnings per share, the main profit gauge in South Africa, from continuing operations was 186.14c in the year to end-February.

While consumers gradually warm up to spending in Africa's biggest economy thanks to lower interest rates and a fall in food inflation, Pick n Pay has yet to see the benefits as it is spending a chunk of its cash building distribution centres to improve margins.

Pick n Pay's profit margin deteriorated to 2.7% from 3.3%, highlighting increased cost pressures in the Cape Town-based company.

Pick n Pay - valued at $3.1-billion - said sales rose 5.9% to R51.9-billion ($7.56-billion), affected partly by a labour strike in October last year. The company slashed its total dividend by 18.3% to 142.5 cents per share.

Pick n Pay said it would step up its expansion across Africa in the coming year to fend off competition as US retailer Walmart prepares to enter the fast-growing continent.

The company, which already runs two stores in Zambia, said it will open three more in 2012, and enter Mozambique with three stores and Mauritius with two next year.

Pick n Pay has about 30 stores in countries outside South Africa, including Namibia and Lesotho. - Reuters