•  Total sales up 5.9%

South African supermarket operator Pick n Pay has booked an increase in first-half sales.

In the six months to the end of August, group sales were up 5.9%, with like-for-like sales growth of 3.2%.

The company said that although new store growth was still behind the market‚ store openings were weighted to the second half of the financial year and "significant" work was underway to strengthen the medium to longer term pipeline.

"Lower than expected turnover growth is the result of increased market competitiveness‚ poor availability of merchandise from suppliers and continued economic pressure on our heartland customer‚" Pick n Pay said.

The group said it expects to record a decrease in EBITDA of between 10-20% and a drop in EPS of up to 10%.

The retailer's full results are expected to be published on 24 October.

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05 October 2012, 12:06 Pick n Pay release trading statement
Shareholders are advised that Pikwik and Pick n Pay ("the Group") are in the process of finalising their financial results for the six months ended 31 August 2012, which are expected to be published on 24 October 2012.

Turnover growth for the period was 5.9% with like-for-like growth at 3.2%. Although new store growth is still behind the market, store openings are weighted to the second half of this financial year and significant work is underway to strengthen the medium to longer term pipeline. Lower than expected turnover growth is the result of increased market competiveness, poor availability of merchandise from suppliers and continued economic pressure on our heartland customer. The Smartshopper programme with over 5.7 million active customers will be critical in helping the Group reinvigorate turnover growth across the business.

The Group has made pleasing progress with its strategy implementation. The group's second distribution centre - in Philippi in the Western Cape- became operational during the period and is performing well ahead of expectations. Initial operating difficulties were encountered at Longmeadow when taking over day to day management of the distribution centre. Operational and cost improvements have been achieved since then. The financial implications of these difficulties plus contract termination costs have had a negative impact on the results.

Pleasing progress has been made in improving labour productivity. Initial results to redesign the merchandise replenishment process are encouraging. A decision was therefore taken to accelerate expenditure on these activities, despite a further negative effect on short term results. An investment has been made in developing internal skills and costs have been incurred. The Group is however confident that while the short term impact is negative, investing in internal skills and accelerating these programmes will bear significant future benefits.

The category buying function was centralised during the current period. Some operational difficulties were encountered which have negatively affected margins and stock availability in the short term. The Group is working with its suppliers to resolve these issues. In the prior period the operational results of Franklins are accounted for as a discontinued operation.

The group expects the results for the six months ended 31 August 2012 to fall into the following ranges compared to the previous period:
EBITDA from continuing operations will decrease by between 10% and 20%;
EPS and diluted EPS from total operations will decrease by up to 10%;
HEPS and diluted HEPS from total operations will decrease by between 10% and 20%;
EPS and diluted EPS from continuing operations will decrease by between 25% and 35%;
HEPS and diluted HEPS from continuing operations will decrease by between 30% and 40%.

 

Original source: Pick n Pay