Pick n Pay narrows gap with rivals

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BR Pick n Pay 8231[1] Independent Newspapers Lebo Moche dishes out baked goods at the Pick n Pay branch in Bryanston, Johannesburg. Photo: Simphiwe Mbokazi

Johannesburg - Pick n Pay believes it is in a stronger position than a year ago, after opening 111 stores, cutting costs and getting closer to lower-income communities.

“We are better positioned to strengthen and grow our core South Africa business and actively explore new strategic opportunities in the rest of Africa,” it said yesterday.

Chief executive Richard Brasher was rather “pleased with the team’s performance”.

The retailer lifted turnover 7.7 percent to R63.1 billion for the 52 weeks to March 2. Same-store turnover grew 2.7 percent, and net new stores contributed 5 percentage points.

Basic earnings a share increased 6 percent to R1.2201.

The new 52-week reporting calendar meant there were four fewer trading days in the current reporting period than in the previous year.

The trading profit margin shot up by a third, from 1.3 percent to 1.6 percent.

Brasher said his first year as chief executive was “pleasing”. “We have improved our turnover in a marketplace which has grown less than it did last year”.

The shortfall between Pick n Pay’s growth and overall market growth narrowed to 0.7 percentage points from 2.5 percentage points a year earlier.

“I am confident that we are performing better and we are being more competitive but I am not of the view that we have completely reversed the trend… I am sure we have narrowed the gap.”

Pick n Pay opened 111 stores during the year and closed 26, raising net space by 3.4 percent.

“We grew our Pick n Pay and Boxer brands across a variety of retail formats, ranging from stores which serve lower-income communities through to our new Waterfront store in Cape Town,” the retailer said.

Pick n Pay was particularly proud of its new stores in KwaMashu, Chatsworth and Hammarsdale in KwaZulu-Natal, saying it served these communities for the first time.

“We are under-represented in the market that our Boxer brand serves and we look forward to expanding our footprint in these areas.”

Brasher was also satisfied with the Pick n Pay supply chain, which he said had grown. “We are delivering more volume at lower costs than we did a year ago.”

Volume through its distribution centres increased 10.8 percent, reducing the cost per case delivered by 6.5 percent.

Head of research at Kagiso Asset Management Abdul Davids said: “From this set of results it looks like Pick n Pay has arrested the decline in market share that it experienced in relation to Shoprite and other competitors.

“The results are slightly distorted because the current year had 364 days versus 368 days the previous year and adding those four days means that the prior year base was inflated.

“Adjusting for this, earnings growth would have been even stronger.”

Operating margins were improving, which indicated the group’s cost rationalisation programme was in place and a lot of cost issues of the past were being addressed.

“While this is positive, from a management point of view there are, however, still various options to rationalise costs and further recover operating margins. Overall, there is still a long road ahead.”

Davids added that Brasher’s appointment had been positive. “He has a sound strategy and definite targets in terms of putting this strategy in place, all of which will contribute significantly in turning around Pick n Pay’s fortunes.”

Brasher said Pick n Pay would open 100 stores this year.

He said the company’s strategy for the next year was to follow its customers. “I want us to work tirelessly on behalf of customers, showing them that we are always on their side.”

Pick n Pay Stores shares fell 41c to close at R52.49 on the JSE yesterday. - Business Report


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