Bloomberg News

Pick n Pay to Slash Jobs as Profit Drops, Wal-Mart Enters

July 06, 2011

(Updates with closing share price in sixth paragraph.)

July 6 (Bloomberg) -- Pick n Pay Stores Ltd., South Africa’s second-biggest grocer, may fire about 8.6 percent of its workforce after profit slumped and the retailer prepares for competition from Wal-Mart Stores Inc.

Labor unions have been informed that Pick n Pay plans to eliminate 3,137 out of 36,673 posts at its retail outlets, the Cape Town-based company said today in two statements. The total number excludes franchise stores.

Pick n Pay’s profit plunged 29 percent in the six months through Feb. 28 as the company lost market share to bigger rival Shoprite Holdings Ltd. and struggled to curb costs, including rising wages after a 13-day strike in November. Wal-Mart, based in Bentonville, Arkansas, bought a 51 percent stake in Massmart Holdings Ltd. last month and said it will create 15,000 jobs in South Africa within five years. It also announced discounts on products from televisions to paint and bread.

“We are somewhat taken aback” at Pick n Pay’s announcement, given that negotiations haven’t been concluded, said Lucas Ramatlhodi, secretariat coordinator for the South African Commercial, Catering and Allied Workers’ Union, which represents 16,000 to 21,000 Pick n Pay employees.

“We are not sure what informs their need to want to retrench people,” Ramatlhodi said by phone from Johannesburg. “Our view is that you cannot conclude that workers are in surplus. We will do everything in our power to defend jobs.”

‘Major Problem’

Pick n Pay shares rose 28 cents, or 0.7 percent, to 42.14 rand by the 5 p.m. close in Johannesburg, giving the retailer a market value of about 20.2 billion rand ($3 billion). The stock has slumped 13 percent this year, compared with a 7.4 percent gain in Shoprite shares.

“The decision had been taken after a great deal of thought over a period of time and was in line with the major problem facing the company in respect of declining profitability and the loss of market share,” Pick n Pay said of the planned job cuts.

--With assistance from Mike Cohen in Cape Town. Editors: Paul Jarvis, David Risser, Emily Bowers.

To contact the reporters on this story: Nasreen Seria in Johannesburg at nseria@bloomberg.net; Sikonathi Mantshantsha in Johannesburg at smantshantsh@bloomberg.net.

To contact the editors responsible for this story: Andrew J. Barden at barden@bloomberg.net


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