April 19, 2018 / 6:08 AM / 7 months ago

UPDATE 1-South Africa's Pick n Pay FY profit up 7.1 pct on costs cuts

(Adds CEO quote, details)

JOHANNESBURG, April 19 (Reuters) - South African retailer Pick n Pay Stores posted a 7.1 percent rise in full-year earnings on Thursday, as the grocer cut costs and increased productivity in store operations.

Pick n Pay said headline earnings per share (EPS), the most widely used profit measure in South Africa that excludes some one-off items, rose to 276.98 cents in the year to the end of February, from 258.65 cents a year earlier.

Pick n Pay said turnover growth increased 5.3 percent to 81.6 billion rand ($6.85 billion) from 77.5 billion rand, while trading profit was up 4.9 percent due to a voluntary severance programme (VSP).

Pick n Pay shed staff last year with a voluntary severance programme, reducing its labour force by around 10 percent. That has improved the efficiency and productivity of staff by removing roles and functions that were no longer required, it said.

“In the first six months, we acted boldly and decisively to reduce our costs and increase our productivity through the VSP and other programmes,” Group Chief Executive Officer Richard Brasher said in a statement.

“By doing so we built a leaner, fitter and stronger Pick n Pay, and gave ourselves the headroom to reduce our prices from the second half of the year.”

South African shoppers are feeling the impact of low growth in disposable income, little to no job creation and tight credit conditions.

To keep attracting struggling consumers, Pick n Pay invested 500 million rand in price cuts across 1,300 everyday grocery items and extended this to 2,000 items in the second half.

The group opened 59 franchise stores during the year, including 7 supermarkets, 35 liquor stores, 9 express stores and 8 spaza shops — a local convenience store. It also opened 29 clothing stores.

Pick n Pay, which also owns discount grocery chain Boxer, declared a final dividend of 155.40 cents per share, bringing the total annual dividend for the year to 188.80 cents, up 7.1 percent.

The group expects the stuff cut programme, both on sales and profit to deliver further momentum in the 2019 financial year. ($1 = 11.9172 rand) (Reporting by Nqobile Dludla; Editing by Gopakumar Warrier/Keith Weir)

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