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Johannesburg - South Africa’s No2 food retailer, Pick n Pay
Stores [JSE:PIK], reported a 15% fall in full-year profit on Wednesday, missing
expectations, hit by costs related to its shopper loyalty programme and
investments in its supply chain.
Pick n Pay said diluted headline earnings per share for continuing
operations fell 15.3% to 157.67 cents in the year to end-February, below the
average estimate of 171.52c in a poll of 12 analysts by Thomson Reuters.
While consumers warm up to spending in Africa’s biggest
economy thanks to lower interest rates, Pick n Pay has yet to see the benefits,
as it is spending a chunk of its cash to improve its supply chain and protect
market share as competition intensifies.
Pick n Pay said sales rose 8.1% to R55.3bn.
The company declared a final dividend per share of 108.35c
for Pick n Pay Stores and 52.57c for Pick n Pay Holdings [JSE:PWK].
The company plans to enter the Democratic Republic of Congo
(DRC) and Malawi in the next 12 months, its chairperson said, as the merchant
stretches its presence on the continent.
“We are busy looking at the DRC and Malawi,” Gareth Ackerman
told a Reuters Africa Investment Summit. “We’ve got three more stores planned
over the next year into those markets.”
Ackerman said Pick n Pay, which has about 94 stores in
African countries outside South Africa, would be expanding more in markets
where it already has operations, which include Zambia, Mauritius and Zimbabwe.
“For us to double the number of stores in the rest of Africa
in the next five to 10 years is absolutely conceivable. We just don’t have
plans for it yet,” he told the summit.
Home to a billion people, dozens of fast-growing economies
and an emerging middle class, Africa is increasingly seen as the next bright
growth spot.
While the resource-rich continent has traditionally drawn
mostly mining companies, it is now luring investors interested in rapid growth
in consumer spending and higher disposable incomes.
Ackerman said Pick n Pay had no immediate plans to set up in
Nigeria because the continent’s most populous country was too far from its
existing businesses and distribution networks in southern Africa.
Pick n Pay is one retailer seen as likely to attract buyout
offers from global grocers such as Tesco, Carrefour and Metro looking to
challenge Walmart Stores in its quest to corner the African consumer.
Ackerman said global retailers had been coming in to South
Africa to look at what pushed the world’s biggest retailer into spending $2.4bn
for control of South Africa’s Massmart Holdings [JSE:MSM], but none had
approached Pick n Pay.
“With Walmart having entered South Africa, most of the big
global retailers have been out here to have a look and see why did they come,”
he said.
South African rival Shoprite Holdings [JSE:SHP] is also seen
as a likely takeover target for multinational supermarket groups.
“They are sniffing around. They are looking and seeing. Whether or not they talking to anybody, I can’t comment,” said Ackerman.
