Pick n Pay to grow as rates drop

Food retailer Pick n Pay is expanding prudently as anticipated interest rate cuts will put more money in consumers' pockets.

During the next year, the company aims to open 20 new stores and refurbish another 44. It will also continue rolling out its Score conversion plan, with another 30 stores to be rebranded to Pick n Pay.

CEO Nick Badminton said it had been a busy year, “and next year stands to be just as busy”.

Chris Gilmour, an analyst with Absa Asset Management Private Clients, said rates were expected to continue going down, which was good news for food retailers as decreases would translate into disposable income and consumers who were buying down should start buying up.

However, consumers were expected to be concerned by the possibility of retrenchments, especially at the lower end of the market.

Badminton said Pick n Pay's hypermarkets were performing well, “with every store meeting or exceeding expectations and all being profitable within the first 12 months”.

The new stores will range in size from 850m² to 5000m² and are a vital part of the retailer's strategy to provide consumers with value for money.

“While the Gauteng region will have the lion's share of openings and refurbishments, other regions will also see a number of key openings and refurbishments. We will open another new hypermarket on the Durban south coast and the Hypermarket Ottery refurbishment in Cape Town opened recently.”

The group said it was reaping the rewards of its refurbishment program. “In October, we relaunched our flagship stores in Benmore Gardens and Bedfordview and the public reaction to these stores was similar to the reaction to the reopening of the Claremont store in Cape Town, where customers queued outside every day for 18 days.”

The Claremont store was Pick n Pay's most successful store opening in a decade while the Benmore and Bedfordview stores were trading above expectations.

Badminton said renovations and new store openings were integral to the business as the group was “committed to ensuring that all our stores measure up to world-class standards in all areas”.

The Score conversions had not increased revenue but were empowering a new generation of black entrepreneurs. During the two years that the conversions would take, an estimated R1bn in assets will be transferred to the entrepreneurs.

The R1bn comprises store sites plus shop fittings.

In addition, the franchisees inherited experienced, qualified employees as well as the goodwill associated with the Pick n Pay brand, Badminton said. Most of the new store owners had effectively doubled turnover, he said.

“By the end of 2009 we estimate the franchisees will generate a combined turnover of more than R4bn a year.

“We are also particularly happy with our emerging market strategy where, for example, in Soweto we have more than doubled our market share from 22% to 47% over the period August 2007 to August 2008.”

He said the group was gaining customers across all income groups.

Source: Business Day
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