'Pick n Pay's Franklins: a bit of a forced sale'

"They put Franklins on the block and now it's a bit of a forced sale. What they needed was a smooth quick deal, it's a headache that just doesn't seem to be going away for them," the analyst added.

The local retailer on Friday, 10 June 2011, said it agreed to extend the cut-off date for its R1.5 billion sale of Interfrank Group Holding (Franklins) to Sydney-based Metcash - the companies are still awaiting judgment in their federal court action in Australia with the Australian Competition and Consumer Commission.

This is the second extension since Pick n Pay first announced last July that it had decided to sell its 80 corporate stores and eight franchise agreements in Australia.

The commission believes that the deal could mean a significant lessening of competition through the removal of Metcash's closest competitor in the New South Wales (NSW) groceries sector.

Metcash is Australia's largest wholesaling and distribution company servicing independent grocery retailers throughout Australia, including those under the IGA and Supa IGA banners.

The cut-off date has been extended from 30 June to 31 July.

Pick n Pay chairman Gareth Ackerman said that the group disagreed with the commission's assertions and said it was confident in the merits of its legal arguments. "We remain confident our arguments will ultimately prevail."

Meanwhile the company is pressing on with its African expansion plans.

"Our two stores in Zambia are trading exceedingly well and in late June, we will open our first store in Mozambique," Ackerman said at the group's annual general meeting (AGM) held this week.

Pick n Pay also plans to open a store in Mauritius later this year and said better cross-border co-operation within the Southern African Development Community (SADC) would make its expansion faster and far more efficient.

Locally the group aims to open a further 12 new corporate and seven new franchise supermarkets as well as 10 clothing stores and 45 liquor stores this year.

In its Boxer stable, it plans to open 13 new supermarkets, seven Punch stores, five liquor stores and five Boxer Builds.

Also at the AGM, CE Nick Badminton said the group had noted that food inflation was beginning to creep upwards.

"Our gross margins are recovering, although we are experiencing pressure on operating expenditure given that this is an investment year and we are seeing structural cost pressure such as water and electricity. Working capital continues to be tight," Badminton said.

He noted that the group had seen real volume growth driven by its loyalty programme, Smart Shopper.

"Our initial target was to sign up three million customers in the first year, but we succeeded in attracting three million active customers within the first two months of launching," he said.

The R140 million loyalty programme was launched in March.

Notably, Ackerman reiterated his opposition to government's planned Protection of Information Bill at the group's AGM and said he hoped that business would, along with civil society, make its voice heard on this critical issue.

Last week Ackerman came out against the controversial Protection of Information bill, saying it would have a direct impact on foreign investment in SA and would also hamper South African businesses from making critical decisions essential to their survival.

"Foreign investors needed the assurance that the country was serious about fighting corruption and that government affairs were transparent and accountable. Readily available and reliable economic data was also essential.

"In the absence of these features, South Africa's reputation as a destination for foreign investment will suffer, as will our reputation as a state that is governed by the rules of openness and accessibility," he said.