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Pick n Pay Climbs on Second-Half Earnings, Expansion Plans

April 18 (Bloomberg) -- Pick n Pay Stores Ltd. gained the most in more than two years in Johannesburg as second-half earnings rose and the South African supermarket chain said it plans to increase selling space.

The shares climbed 4.5 percent to 44.20 rand at the close of trading, the biggest gain since July 2009. That pared the stock’s fall this year to 5.2 percent, giving the company a market value of 21.2 billion rand ($2.7 billion).

Earnings excluding one-time items climbed 6.7 percent to 105.98 cents a share in the fiscal second half through February from a year earlier, following investment in a loyalty program and distribution system, the retailer said in a statement today.

“The second-half earnings show we’ve potentially seen a bottoming out as the benefits of its investment spending comes through,” Shamil Ismail, an analyst at Cadiz Securities, said by phone from Cape Town.

The retailer plans to open more than 100 stores in the next year, representing about 3.5 percent growth in new space.

Pick n Pay has trailed in overall space growth and been “underweight in fast-growing smaller supermarkets,” Deputy Chief Executive Officer Richard van Rensburg said in an interview from Cape Town today.

Convenience Stores

The retailer plans to open 100 “neighborhood” convenience outlets in South Africa over the next five years, van Rensburg said. The company is also looking to open more than 100 stores at service stations in “the next few years” and may open 10 premium outlets aimed at high-income earners in the next three to five years, he said.

Pick n Pay plans to open three new stores in Africa in 2013, excluding TM Supermarkets in Zimbabwe and stores in South Africa, with one each in Mozambique, Zambia and Mauritius.

Trading space is expected to grow more than 4 percent in fiscal 2013 and as much as 6 percent in the following year, van Rensburg said.

Earnings growth, as seen in the fiscal second-half, may be “muted in the next two years,” because of costs related to the company’s investment in distribution and information-technology systems, van Rensburg said.

Shoprite Holdings Ltd., Africa’s largest food retailer, said on Feb. 21 that profit climbed 20 percent to 1.4 billion rand in the six months through Dec. 11 from a year earlier.

To contact the reporter on this story: Janice Kew in Johannesburg at jkew4@bloomberg.net

To contact the editor responsible for this story: Antony Sguazzin at asguazzin@bloomberg.net

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