Western Cape Business News

Send  Share  RSS  Twitter  19 Oct 2011

RETAILING: P n P Trading Profit Drops 32%


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Turnover for the Cape Town-based Pick n Pay Group for the six months ended 31 August 2011 increased 7.4% to R27.1 billion, with good sales growth from like-for-like stores. The company’s gross profit margin dropped slightly from 17.8% to 17.7%, while trading profit declined 31.7%.

Chief executive officer Nick Badminton said the financial performance of the past six months should be seen in the context of investments of about R270-million into the transformation of Pick n Pay into a world-class retailer. The three major areas of investment have been the launch of smart shopper, the introduction of a specialist category buying team and further enhancements to the distribution infrastructure and processes.

While these investments have come at a material cost in terms of earnings, they are necessary as part of the company’s strategic transformation process and position us very well for future growth.”

Group like-for-like turnover increased by 4.8% in the period under review, while EBIDTA declined by 17.8% to R882.4 million.

Headline earnings per share were 54.73 cents, 39.3% down on the previous year. The company declared an interim dividend per share of 22.50 cents per share for Pick n Pay Stores Limited, and 10.91 cents per share for Pick n Pay Holdings Limited.

The period saw an encouraging improvement of R900 million in cash generation from continuing operations.

Our improvement in sales shows that more customers are shopping with us more often. Smart shopper has exceeded our projections for the first year by six months as we have signed up 30% more cardholders than we expected for the full year, with 4.1 million cardholders. Although the programme is in its infancy, we believe the encouraging growth in turnover is due in part to this programme. Importantly, the value of a loyalty basket is about 2.5 times that of a non-loyalty basket and is growing more rapidly. There is much more in the pipeline for the programme which is yielding valuable information about our customers and their needs. This information will enable us to improve our business by using our understanding of the customer to change range, promotions and store layouts.

We have made a major investment into putting a single specialised category buying function in place. This will enable us to improve our customer offering, reduce our operating costs and work more efficiently with suppliers. We announced our new specialist category buying team in mid-October and the entire team will be in place by March 2012.

In terms of centralised distribution there are plans to optimise the rollout of our Longmeadow operation, which has already achieved operational improvements over the last six months, with a decrease in distribution cost per case. Over the next five years we will open our Western Cape distribution centre, as well as further centres in KwaZulu-Natal, Eastern Cape and Gauteng,” said Badminton.

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