Pick n Pay narrows first-half loss as turnaround gains traction

Grocery retailer Pick n Pay reported a narrower headline loss in the first half on Monday on higher margins and tighter cost control, boosting confidence ​that CEO Sean Summers’ turnaround plan is beginning to deliver results. The country’s number two grocer by ​turnover is seeking to restore profitability and regain shoppers after years of market-share ⁠losses and weak store performance. The group’s headline loss for the 26 weeks ended August 30 narrowed ​32% to R299 million, while trading profit rose 58% to R490 million. Gross margin expanded 0.7 ​percentage points to 18.8%, supported by a better product mix and supply-chain improvements. Shares were up 4.3% at R22. The retailer has been rebuilding profitability through cost cuts, store closures, a revamped fresh food offering and improved ​inventory management that has reduced stock holdings and freed up working capital. It introduced more than 50 new ​and upgraded fresh lines this year, driving stronger category growth and increased customer participation in its fresh food offering, Summers ‌said. “Customers ⁠are increasingly choosing Pick n Pay,” he added. He said the initial benefits of turnaround measures were beginning to show in the financial results, with significant further benefits set to flow over the coming 2-1/2 years. CONSUMERS UNDER PRESSURE Chief Financial Officer Tina Rookledge said the retail environment remained challenging, with consumers under pressure and ​food inflation at a 16-year ​low, meaning retailers had ⁠to boost traffic to drive up sales in value terms. Summers estimated the conflict in the Middle East, which has inflated fuel costs, had cut sales growth ​by about 3%, with every 1% loss in sales growth costing the ​retailer roughly R140 ⁠million to R150 million in income. Group turnover rose 2.4% to R60.5 billion, supported by 6.3% growth at value retailer Boxer, while sales at the core Pick n Pay business were broadly flat after strategic ⁠store ​closures over the past year. The retailer also reached an agreement with ​labour unions on a new store labour model that will be implemented from November 1. Summers said the changes would improve ​staffing flexibility and costs .