Pick n Pay puts job creation first

Johannesburg - Pick n Pay Stores created more than 2 000 new jobs in the first half of its financial year and opened 74 new stores as part of plans to grow its market share in the face of South Africa’s sluggish economic growth.

“The group is on track with its 2015 plan to create 5 000 new jobs per year by 2020. A further 2 100 new jobs were created in the first half of this year, bringing the benefits of work to more employees and their families,” Richard Brasher, Pick n Pay’s chief executive said on Tuesday.

A Pick n Pay store in Bryanston. File picture: Simphiwe Mbokazi. Credit: INDEPENDENT MEDIA

Pick n Pay, South Africa’s second-largest food retailer, which signed a three-year wage agreement securing certainty after a deal with SA Commercial, Catering and Allied Workers Union, said it remained on track to spend close to R2 billion in capital expenditure this year on new store expansions and upgrading its current stores.

The announcement came as it posted its seventh consecutive growth in headline earnings yesterday, having cut costs following the implementation of its turnaround strategy.

Pick n Pay, which owns discount shopping chain Boxer, closed 0.89 percent higher on the JSE on Tuesday to trade at R66.63 a share as it reported that headline earnings had grown by 23 percent to 82.43 cents a share in the six months to August from 66.62c a share in the six months to August last year.

The group was unable to pass costs to consumers and capped food price inflation at 5.5 percent, below consumer price index food inflation of 10.7 percent over the period under review.

“Our job is to keep prices down. I cannot know if food inflation will be lower, but I do know that we will be in the front of the line to make sure that it comes down,” Brasher said.

The group indicted that the high levels of food inflation seen in recent months were beginning to alleviate.

New products

Brasher said Pick n Pay would give customers a “good time” in the upcoming holiday season.

“We are planning to offer new products to our customers, especially during the Christmas season. We will see the return of our Stikeez promotion and we have a lot that will come our customers’ way. Father Christmas will turn up. He might not have all the right presents, but he will be there,” he said.

Brasher was referring to Stikeez, a popular promotional campaign aimed at improving customer experience that captivated children.

Some of the Cape Town-based group’s financial highlights included an 18 percent increase in profits to R381.8 million in the period under review. Sales rose 7.2 percent and the interim dividend increased 24 percent to R2.99 a share.

Ron Klipin, a portfolio manager at Cratos Wealth, said the group’s turnaround strategy had resulted in major cost-cutting in areas such as consultants and management, as well as a more flexible staff scheduling.

“The smart shopper card has also changed the way Pick n Pay does business, with beneficial results,” he said.

He noted that Shoprite and other peers were growing revenue at double-digit increases, and “Pick n Pay inflation of 5.5 percent indicates an inability to fully pass on costs”.

Suvasha Kander, a fund manager at Ashburton Investments, said the Pick n Pay financial results were in line with market consensus.

Kander said the Stikeez campaign might have increased the company’s footfall and boosted revenue growth in the previous financial period.

She said that consumers’ basket sizes were reducing amid higher food inflation, which resulted in a negative impact on volume growth.

“They are substituting more expensive items for cheaper items and reducing the package sizes,” she said.