Pick n Pay bets on new CEO after sinks into loss

By Nqobile Dludla

JOHANNESBURG (Reuters) -Pick n Pay will review its strategy after the South African grocery retailer made a half-year loss, the new chief executive officer charged with luring back customers and restoring profits said on Wednesday.

By 1134 GMT shares in Pick n Pay had shed 13.70% to 25.58 rand ($1.35), its lowest in 15 years, after the retailer also withheld an interim dividend payout.

Pick n Pay reported a pro forma loss before tax, which excludes certain items, of 837.2 million rand in the 26 weeks ended Aug. 27 from a profit of 588 million rand the same time a year ago.

It blamed incremental costs and increased competition.

Pick n Pay has lost market share to rivals, including Shoprite that invested in new products and store revamps.

Former CEO Pieter Boone announced a strategy in May last year that included converting some core Pick n Pay stores to value QualiSave store brands.

But the core Pick n Pay business has struggled, prompting the retailer to announce earlier this month it had brought back Sean Summers as CEO to attempt to turn the business round.

“To be honest, the execution of that (conversions) strategy needs to be revisited and we need to have a look at what is actually going on that we’re not getting the return we set about getting,” Summers told investors.

“So yes those Ekuseni numbers and targets are going to be revisited,” he said, referring to the strategy’s name.

The review might entail migrating some QualiSave stores back to the core business or value Boxer brand, while also returning the Pick n Pay grocery business to growth and profitability Summers said.

The core Pick n Pay business only grew sales by 0.3%.

“The truth is Pick n Pay has fallen out of love with its customers, with its people and with its suppliers,” Summers said.

The retailer flagged lower full year earnings, with Summers saying the chances of paying a full year dividend are slim because “the company needs to constrain itself and invest appropriately.”

($1 = 18.8886 rand)

(Reporting by Nqobile Dludla; Editing by Clarence Fernandez and Barbara Lewis)