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Pick n Pay profit slumps as retailer forks out for retrenchment plan

Pick n Pay said it expects half-year headline earnings per share (Heps) to be down over 20%, after a voluntary severance programme in April 2017 saw the retailer cut back 10% of its roles and functions.

Pick n Pay said in a statement on Monday that the financial benefit of the voluntary retrenchment plan will only be realised from the 2019 financial year, “with significant positive impact on operating costs, making the group more competitive and sustainable”.

The full cost will be expensed in the first half of the 2018 financial year, it said. As a result, Heps is expected to be down more than 20% (17 cents) to 82.43 cents, in the 26-week period ended August 28 2016.

“The Voluntary Severance Programme is one of several steps we have taken to make our business more competitive in what is a tough trading environment,” said Pick n Pay CEO Richard Brasher. “For reasons of timing, it will have a material impact on our half-year result.

“But it has made us a leaner and more efficient business, and the reduction in our costs will give us more headroom to provide customers with even lower prices and better value. Our plan is on track and we are a stronger and more sustainable group as a result.”

Pick n Pay makes progress in second stage of plan

Having delivered on the first stage of its strategy, to stabilise the finances and operations of the business, Pick n Pay said it is making progress in its second stage, which is to change the trajectory of its performance and restore a sustainable profit margin.

This has resulted in permanent price reductions across more than 1 300 fresh and grocery products, “providing vital assistance to customers in a difficult economy”.

It has also modernised the Smart Shopper loyalty programme to deliver customers “immediate and tailored weekly discounts on products, reducing the emphasis on awarding points linked automatically to spend”.

Progress has also been made in improving the centralised supply chain to deliver more efficient product replenishment, improve on-shelf availability, and reduce cost.

In addition, action has been taken to improve the efficiency and productivity of staff in all areas of the business.

Voluntary severance programme

Pick n Pay said it identified opportunities earlier this year to remove around 10% of its roles and functions across its Pick n Pay head office, regional structure, store operations and supply chain.

“These roles and functions were no longer required due to improvements in organisation, planning and technology,” it said.

To remove these roles and functions from the business, Pick n Pay embarked on a voluntary severance programme, through which employees were offered 1.5 weeks of pay per completed year of service, plus four weeks of notice pay.

“This programme has now been completed. It was conducted in accordance with the longstanding positive values of the group. Participation by employees was entirely voluntary, and the process did not give rise to any labour dispute or other disruption of the group’s operations,” the retailer said.

“Through improved ways of working and greater productivity, the group has been able to minimise the impact of the programme on its operations and on customer service.”

Pick n Pay said it is confident that the voluntary severance programme “is a significant step in making the business more competitive and more sustainable”.

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