Pick n Pay profit rises as South Africans flock to discounts

Pick n Pay Stores Ltd. said first-half earnings rose as South Africa’s second-largest supermarket chain attracted cash-strapped shoppers with discounted goods and opened new stores.

“Despite unfavorable economic conditions, customers get up in the morning and shop for food,” Chief Executive Officer Richard Brasher said in a presentation in Cape Town on Tuesday. To win or retain shoppers, the grocer is offering promotions and extending its lower priced own-brand range, the former Tesco Plc executive said. The retailer has also introduced smaller sizes on several products.

The initiatives are helping Pick n Pay tackle challenges facing South African retailers that include weak domestic consumer confidence, rising interest rates and unemployment of 27 percent. The shares rose 2.9 percent to 67.95 rand by 11:22 a.m. in Johannesburg, on track for the biggest gain since Sept. 22.

Pick n Pay’s profit increased 18 percent to 381.8 million rand ($27 million) in the six months through Aug. 28, the Cape Town-based company said in a statement. Sales rose 7.2 percent and the interim dividend increased 24 percent to 2.99 rand a share. The retailer opened 74 Pick n Pay and mostly rural Boxer stores in the period. It trails Shoprite Holdings Ltd. in terms of market share in Africa’s most industrialized economy.

The high levels of food inflation seen in recent months are beginning to ease and Pick n Pay’s long-term plan to become more efficient, improve profit margin and increase sales remains on track, Brasher said. The retailer’s efforts to cater to lower income customers will be extended as it accelerates the opening of its Boxer stores, he said. The company added 15 new Boxer stores in the first-half.

Pick n Pay opened seven new supermarkets outside South Africa in the six-month period, in Namibia, Zambia and Zimbabwe. The company plans to enter Ghana next year and Nigeria in 2018.