Pick n Pay CEO's profit promise is on track
Pick n Pay grew its after-tax profit by 15 per cent to R438.8 million for the 26 weeks to August 2017 and diluted headline earnings per share grew by 13 per cent to 90.36 cents, according to a report out today.
“The grocery retailer’s turnaround plan, which has been five years in the making, starts to deliver,” says www.moneyweb.co.za
“Nearly three years ago, Pick n Pay’s CEO Richard Brasher told shareholders that the retail group had completed its phase of ‘stabilising the business’ that was the first step in its effort to rein in losses and return the retailer to its former glory.”
He then focused on growth by offering customers lower prices and sprucing up its ageing store network and the interim results finally show the South African supermarket giant is on the right track.
“However the retailer is not out of the woods yet as sales and profitability are still challenged,” says the www.moneyweb.co.za report.
Trading margins – the key metric to measure profitability in the retail industry – grew to 1.6 per cent from 1.5. And Shoprite, Pick n Pay’s closest competitor, is accustomed to interim trading margins of above 5 per cent.
“If the market was a bit more buoyant and if consumer confidence levels were higher, it would be quicker to turn the business around,” said CEO Brasher. He added that Pick n Pay has two to three years to go for its recovery plan to yield a trading margin growth of at least 3 per cent – last seen by the retailer in 2010.
Ron Klipin, a portfolio manager of Cratos Wealth, told www.moneyweb.co.za: Pick n Pay’s margins are “not inspiring” as he expected that the retailer’s recovery, which has been five years in the making, would deliver margins of at least 2%. “There’s a lot of hard work still to come. It will take time to grow margins given a tough consumer market,” he said.