Weak economy hurts Pick n Pay

Pick n Pay posted an 18 percent rise in full-year profit, as the supermarket chain targeted labour costs amid political tensions and significant pressures exerted on the South African consumer. Headline earnings per share was 264.35 cents in the year to end-February compared with 224.04 cents a year earlier, while sales grew 7 percent and a dividend of R17.30 per share was declared.

"A stronger gross profit margin and well-controlled costs demonstrate the value of the Group's increasingly centralised supply chain and greater operating efficiency in a low-growth environment," the firm said.

Pick n Pay, which is celebrating its 50th year of operation, was founded by Raymond Ackerman in Cape Town and has since expanded to become a self-owned and franchise supermarket and retail behemoth with stores across Southern Africa. It also owns a 49% stake in Zimbabwean supermarket firm TM Supermarkets.

Pick n Pay has lagged behind its rivals in recent years, including market leader Shoprite, but the firm responded by bringing in Richard Brasher as CEO in 2013 to try to turn things around. A veteran retail man, Brasher headed up the UK division of Tesco from 2011 to 2012.

"At all income levels, people are finding it harder to make ends meet - they are demanding consistently lower prices and better value. In our low-growth economy, competition for the hard-pressed customer is going to be the new normal," said Brasher.

On the expansion front, Pick n Pay opened 68 new company-owned stores and 25 new Boxer stores over the year, including 14 Pick n Pay local convenience stores. The group also added 24 clothing stores and 46 liquor stores to its portfolio, along with 12 new supermarkets outside South Africa. It is planning to have a presence in West Africa within the next two years.

The group was also extending its fresh produce line, investing R500 million in offering substantial discounts on 1 300 food items and revamping its loyalty programme, which boasts 7 million active members, to offer weekly personalised discounts tailored specifically to each customer on the basis of their actual shopping habits.

In view of what he called "anti-business rhetoric", chairman Gareth Ackerman (pictured) used his opening address to fire a salvo at those who doubted the company's contribution to socio-economic progress.

Companies like Pick n Pay are doing everything we can to support consumers and sustain South Africa. "We have invested over R5-billion in new and refurbished stores over the past four years. We have created over 10 000 new jobs. This last year alone, we have paid R470 million in company tax, collected R770 million in VAT and paid R810 million in employee-related taxes."