Pick n Pay’s Zimbabwean partner - Meikles Limited - yesterday announced that it was focusing on new development projects for its supermarkets division, despite depressed consumer demand and a 4.8% decline in units sold for the year to the end of February.
The troubled South African grocer has a significant interest in the TM Supermarket’s Zimbabwean operator, with some outlets branded Pick n Pay and others co-branded.
Although it has been reducing its footprint in South Africa following sluggish performance in its just ended year, there have been more Pick n Pay stores opening in Zimbabwe.
“The group focuses on adapting to evolving economic conditions, including the new currency, the Zimbabwe Gold,” John Moxon, chairman of Meikles, said.
“The group will continue with the planned development projects, primarily in the supermarket and properties segments.”
In the year to the end of February, revenue in the TM/Pick n Pay stores in Zimbabwe grew by 102% in local currency terms, however, units sold for the year declined by 4.8%.
This was “due to the combined effect of uncompetitive US dollar prices for formal retail and depressed consumer demand” in the Zimbabwean economy.
“The authorities controlled the in-store exchange rate used by formal retail players, while informal players used higher exchange rates, giving them a competitive edge,” Moxon said.
“Despite this impediment, units sold in the second half of the financial year recovered by 5.2 percentage points, reducing the full-year deficit to 4.8% from 10% at the half-year mark.”
Meikles said revenue received in the supermarkets division for the period under review in foreign currency was below 20% of the total revenue.
This “fell far short of the average mix of transactions conducted in foreign currency in the economy, which was 80% in US dollar, due to the uneven enforcement of the in-store exchange rate” policy.
However, the TM/Pick n Pay stores maintained gross margins for the period at 23% despite the volatility of Zimbabwean dollar prices.
Operating costs were 110% higher due to the constant movement in the exchange rate for the Zimbabwean local unit of exchange.
During the year under review, two new stores opened in Gwanda and in central Harare, with capital expenditure for this funded from operating cash flows.
“The segment demonstrated resilience in working capital management, in the face of frequent changes in supplier trading terms,” added Moxon.
Pick n Pay has embarked on a restructuring plan to save its market position and claw out of huge debts, with chairman Gareth Ackerman set to relinquish control of the South African grocer that recently reported a reversal of fortunes into a loss.
Market analyst Simon Brown said Pick n Pay “is in trouble and needs cash” as soon as possible.
In March, the board of Pick n Pay authorized the grocer to take up loan facilities amounting to R1 billion with banks such as FirstRand.
As at the end of February 2024, net debt in Pick n Pay had grown from R3.7bn in 2023 to R6.1bn.
BUSINESS REPORT