South Africa’s Pick n Pay retailer to cut costs by $187 million in 3 years


One of the country’s largest retail chains is seeking to improve shareholder returns, which have fallen over the past 12 months in a highly competitive grocery market dominated by its biggest rival Shoprite.

Cost savings will be achieved through efficiencies in supply chain and working capital, a leaner help desk, leveraging technology to reduce costs, and simplifying store operations, said Lerena Olivier, the group’s chief financial officer, after Pick n Pay earlier announced an increase in its annual profits.

The group is also looking to entice more customers to shop at its discount Boxer grocery chains and its midscale Pick n Pay stores in a highly competitive grocery market.

It will do this by rolling out 200 Boxer stores and refining its product lines in its Pick n Pay chain to better serve affluent and low-middle income customers through two different Pick n Pay brands instead of one. alone, Boone told investors.

“We’ve tried to be everything to everyone and as a result, we end up losing relevance and differentiation,” Boone said, referring to the challenges of serving all customer groups from a single source. brand.

MARKET SHARE

The retailer also aims to tap into more customers online through continued investment in its e-commerce business, which will result in an eight-fold increase in sales by its fiscal year 2026, it said.

Other initiatives will enable Pick n Pay to grow group revenue at a compound annual rate of 10%, resulting in market share growth of at least 3% by 2026. The company also pledged to increase its pre-tax profit margin to more than 3% by 2026, from 2% currently, and to double Boxer sales, he added.

The formal food and grocery market in South Africa is expected to grow by R227 billion ($14 billion) to reach R855 billion by 2026, with most of the growth coming from the food market. lower incomes, Mr. Boone said.

“Today we have 16% overall market share in the formal market. Opportunity is everywhere, but especially in the less affluent part of the market,” he said.

Its growth initiatives will be supported by a capital investment of 3.5 billion rand for the 2023 financial year. Capex will remain around this medium-term level, Olivier said.

The group previously reported net earnings per share, the main measure of profit in South Africa, of 262.59 cents for the year ended February 27, compared with 229.31 cents for the previous comparable period.

Pick n Pay, with a nationwide footprint of more than 1,900 stores, also announced a commercial agreement with Takealot, the Naspers-owned e-commerce giant, which will allow its customers to purchase its grocery and liquor products on the Mr D food delivery app from Takeaalot. The launch will take place in August.

($1 = R16.0011)



Source link -88