Pick n Pay rings up profit leap of 35%

Despite consumers wringing their wallets, Pick n Pay is on track to open more stores in the second half of its financial year to February than the first.

When CEO Richard Brasher took the reins two years ago, he said he was going back to the basics of retailing.

"Pick n Pay is steadily becoming a leaner, more efficient and more productive business. As a result, we are demonstrating a sustained ability to grow profit - broadly in line with firm external expectations," Brasher said yesterday.

PnP, which has lagged behind the growth of peers Shoprite and Woolworths for half a decade, seems to be catching up.

Despite dipping by about 1.5% yesterday, the company's share price is up nearly 20% on a year ago, compared to Shoprite's drop of 24.3% and Woolies's fall of more than 10% year-on-year.

The retailer's profit before tax was 35% higher for the six months to the end of August than in the corresponding period last year.

PnP cut costs and took firmer hold of its logistics to do so.

It said enhanced efficiencies and cost reductions were the result of its investment in better systems, specifically centralised category-based procurement, distribution and administration.

"Our supply chain, distribution and store replenishment systems are improving in line with our plan.

"We are making determined progress on our strategy to centralise all products, except for live fish and newspapers," Brasher said.

The improved systems helped PnP to achieve more effective inventory management, with stock levels reduced by two days in the distribution centres and the total value of stock on hand down 6%, the company said.

The retailer recently opened 46 new stores and is planning another 80 this half-year.

"In terms of new space, we are not in the business of buying market share or opening unprofitable stores.

"We want new stores to deliver good returns, and our first-half openings reflect this," said Brasher.