Pick n Pay’s strong results came on the back of a solid performance in South Africa, its home market. Photo: Simphiwe Mbokazi African News Agency (ANA)
JOHANNESBURG – Retail shares on the JSE on Tuesday rode a wave of positive investor sentiment after Pick n Pay showcased buoyant results for the 26 weeks ended September despite the country's economic malaise.

The South African food giant's shares leapt 13 percent after it reported that it had expanded its gross profit margin to 19.8 percent from 18.8 percent a year earlier.

Pick n Pay’s strong results were on the back of a solid performance in South Africa, its home market, and set the tone for JSE-listed retailers who jumped on the news.

The shares rose to a high of R69.56 on the news in intra-day trade before closing the day at R67.98.

Pick n Pay’s peers Spar jumped 5.42 percent to R200.29 a share, while Shoprite, Africa’s giant food retailer, rose 3.63 percent to R137.55 a share. Tiger Brands rose 1.35 percent to R215.30 a share, while clothing retailer Mr Price was up 7.22 percent to close at R169.38 a share, and The Foschini Group (TFG) was 4.99 percent higher at R177.33 a share.

Pick n Pay chief executive Richard Brasher said Pick m Pay and Boxer stores now appealed across a very broad range of incomes, preferences and communities.

“This has positioned the group well to identify and pursue opportunities for growth in a dynamic and sustainable way within a persistently low-growth economy,” Brasher said.

Brasher said the company had gone back to basics thanks to the group's competitive price strategy coupled with its promotional programme.

“Over a number of years, the group has succeeded in developing much greater relevance and flexibility in its customer offer, format and operating model.

"An emphasis on cost discipline and greater efficiency has provided headroom for investment in price, quality and value for all customers,” he said.

Result highlights included the 4.8 percent jump in revenue to R44.2 billion from R42.2bn in the prior year, and the 9.5 percent hike in the interim dividend to 42.80 cents per share in line with comparable growth in headline earnings per share.

The trading profit from South Africa was up by 16.4 percent to R1.15bn from R995 million a year earlier. The trading profit margin grew to 2.8 percent from 2.5 percent a year earlier.

While the South African business outperformed the group, Zimbabwe continued to experience a liquidity crunch and trading conditions in Zambia remained constrained, with the weaker Zambian kwacha weighing on the group turnover growth, Brasher said.

“Reported earnings from the Rest of Africa division are down 79.8 percent year on year, reflecting particularly the difficult economic conditions in Zimbabwe,” Brasher said.

In terms of extending its footprint, the company said net new stores added 3.1 percent to sales growth.

Pick n Pay reopened its flagship On Nicol store in Sandton, Johannesburg, last week after a major renovation.

The store is part of its next-generation store concept focused on fresh food and convenience.

Gareth Ackerman, the chairperson of Pick n Pay, said earlier yesterday that the company was on the right path by focusing on modern retail stores.

“Modern retail gives more and more people access to all the benefits that flow from the formal economy. Lower prices, safer stores, safer products,” Ackerman said.


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