Tough trading likely to continue — Pick n Pay

RETAILER NEWS

Business Live - Jun 19th 2012, 08:58

The country’s second-largest retailer, Pick n Pay (PIK), is operating in a time of tightened consumer spending, increased competition in the retail sector, and increased food inflation and utility costs, the retailer’s chairman, Gareth Ackerman, said on Friday. 

“As with previous years, these and other factors have combined to make a difficult trading year and they are likely to continue in the medium term,” Mr Ackerman said at the retailer’s annual general meeting in Cape Town.

The beleaguered grocer is trying to get its house in order after facing a barrage of criticism for its lacklustre performance over the last few years.

“The company took its eye off the ball many years ago in a number of areas, notably in general merchandising, when it stopped the rollout of its Hypermarket chain.

“They also ignored the global trend towards centralised distribution, and as a result are now running a marathon at a sprinter’s pace in order to make up for lost time,” said Chris Gilmour, analyst at Absa Asset Management Private Clients.

Despite efforts to improve operating efficiencies through sizable investments in its loyalty programme, centralised distribution system and specialist category buying function, Pick n Pay’s problems are deep-seated and 2014 would be the earliest before any meaningful sustained improvement is manifested.

According to Mr Ackerman, however, the company is on the road to recovery.

“After several years of extremely difficult trading conditions, often traumatic restructuring and very considerable capital expenditure, Pick n Pay is showing signs of the green shoots coming through, which has been our goal since we launched on our ambitious transformation programme,” he noted.

Mr Ackerman, added, however, that it was not an “easy or risk-free” journey and that there was still much to be done before the group could claim to have achieved all that it had set out to accomplish.

The retailer is aiming for more than 50% of total company grocery distribution to be centralised by the end of February 2014.

Last month, Pick n Pay opened its second distribution centre, following the launch of its distribution warehouse in Longmeadow, Gauteng, in 2010.

The opening of the distribution centre in Philippi, Cape Town, forms part of the roll-out of four sizeable distribution centres around the country, with a total investment of R2bn.

By February this year, the total number of Pick n Pay stores outside South Africa — both owned and franchise — was 94.

The company opened three new stores in Zambia during the year, as well its first store in Mozambique and first two stores in Mauritius.

“We have three openings planned for 2013 — in Mozambique, Zambia and Mauritius. We increased our stake in TM to 49% and the first Pick n Pay store in Harare opens next week,” Mr Ackerman said.

He commented that during the past year, the protracted international financial crisis had continued to threaten South Africa’s tentative economic recovery.

“This is complicating our ability to create jobs, restore consumer confidence and kick-start necessary economic growth.

“It is also compounded by domestic issues such as poor productivity, public policy uncertainty and severe crises in education, health and agriculture,” Mr Ackerman concluded.