Pick n Pay to boost fresh goods sales as 100 new stores open

Pick n Pay Stores, South Africa's second-biggest grocer, plans to increase fresh produce sales and gain market share as it opens about 100 new stores in the next 12 months.

The company is working to regain customers from competitors including Shoprite Holdings, Africa's largest grocer, and has been trying to cut costs and improve its supply chain amid a downturn in consumer confidence.

Net income increased 6% to R583.7-million in the 12 months through March 2, the Cape Town-based company said in a statement on Tuesday. Boosting sales of fresh produce is a "significant focus" chief executive Richard Brasher, a former director at Tesco who was hired last year, said in a telephone interview from Cape Town. 

"You have to improve your supply chain, improve your supplier base, improve your assortment and make sure you put roots down with growers and farmers so that you can actually support that ambition over time," he said. "Pick n Pay can and should do a better job in that space."

South African retailers have been struggling as rising unemployment and a hike in interest rates damps consumer spending. Retail sales growth probably slowed to 3.8% in February, compared with 6.8% the previous month, according to the median estimate of 14 economists surveyed by Bloomberg.

"Management is doing a fantastic job in a tough retail environment and we are finally seeing results," BPI Capital Africa analyst Luis Colaco said by phone from Cape Town. Even so, a recovery may already be priced in to the stock, Colaco said. The shares trade at 30.44 times estimated earnings, according to data compiled by Bloomberg.

Narrowed gap
Pick n Pay shares declined 0.8% to R52.49 at the close in Johannesburg, after rising as much as 0.9% earlier in the day, close to a record high. The stock climbed 17% last year, compared with a 12% decline on the FTSE/JSE Africa Food & Drug Retailers Index.

After losing about 1 percentage point in market share in each of the last three or four years, the company has narrowed the gap, Brasher said. The difference between Pick n Pay's growth and the rise of the total market narrowed from 2.5% in the previous year to 0.7% this year, the company said.

Pick n Pay has cut operating expenses as a percentage of revenue "despite rapidly rising fuel, utility, property and other costs," Brasher said.

Nigeria opportunities
The company's like-for-like sales in Africa outside its home market climbed 9.4%.

Pick n Pay, which closed its Mauritius and Mozambique franchise operations, saw "good growth" in Zambia and has set up a team to "explore opportunities" in Nigeria.

Woolworths Holdings, the South African food and clothing retailer that has been increasing its fresh produce sales, said in November it would close its three Nigerian stores because of high rental costs, duties and difficulties with its supply chain.

Pick n Pay full-year sales rose 6.5% to R63.1-billion, while the retailer raised its dividend by 10% to 92.3 cents per share. – Bloomberg

PW Botha wagged his finger and banned us in 1988 but we stood firm. We built a reputation for fearless journalism, then, and now. Through these last 35 years, the Mail & Guardian has always been on the right side of history.

These days, we are on the trail of the merry band of corporates and politicians robbing South Africa of its own potential.

To help us ensure another 35 future years of fiercely independent journalism, please subscribe.

Advertisting

Test backlog skews SA’s corona stats

With thousands of samples still waiting to be processed, labs are racing to ramp up testing to help the government gain a better idea of how prevalent Covid-19 really is

M&G’s latest Covid-19 projections

Covid-19 numbers are prompting disaster declarations and dramatic action across South Africa this week. All steps should be directed by numbers

Press Releases

The online value of executive education in a Covid-19 world

Executive education courses further develop the skills of leaders in the workplace

Sisa Ntshona urges everyone to stay home, and consider travelling later

Sisa Ntshona has urged everyone to limit their movements in line with government’s request

SAB Zenzele’s special AGM postponed until further notice

An arrangement has been announced for shareholders and retailers to receive a 77.5% cash payout

20th Edition of the National Teaching Awards

Teachers are seldom recognised but they are indispensable to the country's education system

Awards affirm the vital work that teachers do

Government is committed to empowering South Africa’s teachers with skills, knowledge and techniques for a changing world

SAB Zenzele special AGM rescheduled to March 25 2020

New voting arrangements are being made to safeguard the health of shareholders

Dimension Data launches Saturday School in PE

The Gauteng Saturday School has produced a number of success stories