* Diluted headline EPS 136.5 cents vs 127 cents forecast
* First annual profit rise since 2010
* Results boosted by cost cuts, new stores
(Adds CEO, analyst comment)
By Tiisetso Motsoeneng
JOHANNESBURG, April 15 South African grocer Pick
n Pay reported a 25 percent jump in annual profit, its
first increase in three years, as new chief executive Richard
Brasher's programme of store openings and costs cuts started to
Once a favourite of investors and customers, South Africa's
second-biggest food retailer by stores has trailed peers both
operationally and in the stock market due to its late investment
in streamlining its supply chain.
But the appointment of Brasher, the former UK head of Tesco
about a year ago, is widely expected to help the Cape
Town-based company compete better with larger rivals Shoprite
Reporting its first full-year results under Brasher, Pick n
Pay said diluted headline EPS rose to 136.5 cents in the year to
end-March from 109.6 cents a year earlier.
Headline EPS, the most widely watched profit measure in
South Africa, strips out certain one-off and non-trading items.
The growth in headline EPS was far ahead of an estimate of
127 cents, according to Thomson Reuters SmartEstimates, which
puts more weight on forecasts from top-ranked analysts.
Brasher said the results - the company's first annual profit
increase since 2010 - reflected a focus on price, merchandise
"Because we have a clear and focused plan, we have got a bit
fitter and we are playing a bit better. Nothing magical. It's
just good, honest shopkeeping," he said in telephone interview.
LONG WAY TO GO
Pick n Pay's performance since Brasher took over has already
prompted the company's retired founder Raymond Ackerman to
proclaim its revival.
But one analyst said more still needed to be done for Pick n
Pay, whose stock is up more than one third since Brasher became
CEO, to catch up with its closest rival Shoprite.
"It's far, far too early to say Pick n Pay has recovered.
Don't get me wrong, I am fully behind Mr. Brasher's strategy but
I just feel it's going to take a long, long time before they get
anything like the profit margins that Shoprite has got," said
Chris Gilmour, an analyst at Absa Asset Management.
Pick n Pay's operating margin has averaged 3 percent over
the last five years, the lowest of nine major South African
retailers and half what Shoprite has achieved over the same
period, Thomson Reuters data shows.
Pick n Pay said annual sales rose 8 percent to 63.1 billion
rand ($6.07 billion), slightly faster than a year ago. On a
same-store basis, sales were up less than 3 percent.
The top-line growth rate was nearly three times slower than
profit, suggesting much of that increase came from cost cuts
which included scaling back dividend payouts, cutting staff and
Brasher said money saved from the 400 layoffs at head office
and regional hubs last year would only show in the 2015 fiscal
The muted sales growth highlights an industry-wide downswing
as rising fuel and electricity prices, increasing interest rates
and high personal debt levels hit consumer spending.
Shares of Pick n Pay, which are up nearly 10 percent so far
this month, fell 0.9 percent to 52.38 rand, lagging behind a 0.5
percent decline in the broad All-share index
($1 = 10.4975 South African Rand)
(Editing by Erica Billingham)