Pick n Pay uses Franklins cash to revamp
Sep 01 2011
Retail Wrap >>

Australia’s Federal Court on Thursday dismissed an attempt by the competition regulator to prevent wholesaler Metcash from buying the Franklins chain of supermarkets in Australia from Pick n Pay.

“We have a huge programme that’s going down in South Africa with all these distribution centres we are building, putting new point of sale into the business; we’ve just launched our smart card, all of which takes a lot of cash,” Gareth Ackerman told Reuters.

Ackerman said the goal for family-run Pick n Pay was to have five new central distributions centres operational by 2014, with one already operational and another to open early next year.

South Africa’s dominant grocers Pick n Pay, Shoprite Holdings and Spar Group are facing tough competition from the world’s biggest retailer, which took a 51% stake in Massmart Holdings and has set out an aggressive price and margin strategy to grab market share in Africa’s largest economy.

Profits are also tight as cash-strapped consumers look to get the most value for their money, hitting the company’s gross profit margin.

Pick n Pay’s gross profit margin deteriorated to 2.7% from 3.3% in the year to end-February.

Ackerman said they were keen to maintain and grow their margins and were targeting a 2% sales increase over the next couple of years.

“We’ve said that we see about 2% of sales that we can take, improve in efficiency over the next couple of years and that’s what we’re busy driving towards,” he said.

Ackerman said he did not foresee further job cuts, although labour flexibility was a key issue as the company continued negotiations with 3 000 staffers facing the chop.

“This issue is not about job cut saving, the issue is about flexibility of labour and we (are) very firm on that, but we have a goal to get our labour bill down by about 1% over the next year or so, which I think is absolutely doable and feasible,” Ackerman said. 

Source: Fin24 at www.fastmoving.co.za, 29 August 2011

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