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Pick n Pay shares up more than 10% after earnings rise

Sales growth in SA up 6%.
In the rest of Africa, reported earnings were down 79.8% year on year, reflecting difficult conditions in Zimbabwe, the retailer has said. Image: Waldo Swiegers/Bloomberg

Supermarket retailer Pick n Pay Stores posted a 9.5% rise in first-half earnings on Tuesday, with strong growth in its core domestic operations outweighing challenges in Zambia and Zimbabwe.

Pick n Pay, which also sells clothes, said comparable headline earnings per share (Heps) for the 26 weeks ended September 1 rose to 85.03 cents from a restated 77.67 cents a year earlier.

Reported Heps, which includes the impact of hyperinflation accounting in Zimbabwe, rose 17.5%.

“At the core of our result is a very strong performance from our South Africa division,” group chief executive Richard Brasher said in a statement.

“In this environment, retailers have found it difficult to balance their two key objectives: delivering solid sales growth while maintaining profit margins. I am very pleased that we have succeeded in growing both our sales and our profits.

Pick n Pay, like its peers, has cut prices in order to attract highly cost-conscious shoppers and cope with the difficult trading conditions that have hit other retailers at home amid a sluggish economy.

Comparable group turnover grew 6%, with like-for-like sales growth of 2.9%. Trading profit rose 12.5% to R1.2 billion.

In South Africa, where it has more than 1 600 stores, Pick n Pay delivered comparable sales growth of 6.5%, with like-for-like turnover growth of 3.5%.

In the rest of Africa, reported earnings, which includes the hyperinflation accounting, were down 79.8% year-on-year, reflecting difficult conditions in Zimbabwe, it said.

“Economic conditions in Zimbabwe have been particularly difficult, with businesses and consumers grappling with political and social instability, high levels of inflation, currency devaluation and shortages of staple goods and services,” Pick n Pay said.

Trading conditions in Zambia also remained constrained, with muted sales growth and the weaker Zambia kwacha weighing on group turnover growth, it said.

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