South African retailer Pick n Pay has admitted that its half-year profits could fall by as much as 50% due to investment to make it a “globally competitive” business.

Pick n Pay said yesterday (5 October) its headline earnings per share for the six months to the end of August would be 40-50% lower than a year earlier.

The retailer said it had continued to invest “significantly” in its “transformation” strategy to become “a globally competitive retailer”.

Pick n Pay is setting up an “efficient” centralised distribution system, is planning to create a “specialist, category buying organisation” and has spent money on launching a loyalty card.

The sale of Pick n Pay’s Australian chain Franklins is set to give the retailer around ZAR1.3bn (US$163.9m) to invest back into its South African operations. Australia’s competition watchdog, which has seen attempts to block the deal turned down, is embarking on another appeal later on 24 October. However, Pick n Pay said it was confident a sale would go through and said the proceeds from the deal would be accounted for in the second half of its financial year.

Franklins will be classified as discontinued operations in Pick n Pay’s first-half results when they are announced later this month. The retailer said its headline earnings per share excluding Franklins would be 35-45% lower. EBITDA would be 10-20% less, Pick n Pay said.

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Pick n Pay, however, said its turnover was up 7.4%. It said the result was “encouraging” given the “tough economic conditions, dominated by low inflation and a highly competitive environment”.