(Updates with investment costs in first paragraph.)

Oct. 4 (Bloomberg) -- Pick n Pay Stores Ltd., South Africa’s second-largest grocer, said fiscal first-half profit as much as halved after introducing a loyalty program and investing in its distribution system.

Earnings per share in the six months through August dropped between 40 percent and 50 percent, the Cape Town-based company said in a stock-exchange statement today. Sales increased 7.4 percent amid “tough economic conditions, dominated by low inflation and a highly competitive trading environment.”

The sale of its Franklins supermarket chain in Australia to Metcash Ltd. was completed on Sept. 30, earning Pick n Pay about 1.3 billion rand ($157 million). Proceeds from the sale, which the company will reinvest in its South African operations, will be accounted for in the fiscal second-half, Pick n Pay said.

--Editors: Vernon Wessels, Emily Bowers

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