Pick n Pay pushes its own brands

• Retailer has set its sights on 30% own-product penetration as it builds a supplier base

Pick n Pay wants almost a third of its in-store products to be its own brands within in a few years, says CEO Richard Brasher. The retailer’s shares surged 8.9% on Thursday after it said festive season sales rose more than its peers. The group plans to lift “own brand participation” from 19% to 30%.

Pick n Pay wants almost a third of its in-store products to be its own brands within a few years, says CEO Richard Brasher.

The retailer, the shares of which surged 8.9% on Thursday after it said festive season sales rose more than its peers, plans to lift “own brand participation” from 19% to 30% in coming years. Brasher said Pick n Pay was building its supplier base for its own brands, “and I think customers like our brand so I feel like we’ve got momentum”.

“The restriction is not ambition and I feel like over the next 18 months to two years we should see some real momentum building in this area.”

Pick n Pay would look to replace weaker brands in its stores with its own, he said.

The group said it had “an exceptional fourth quarter”, with the South African business growing sales by 8%, “well ahead of the market”.

Brasher said this was thanks to better productivity after Pick n Pay spent R250m on voluntary severance packages. It also benefited from having 124 net new stores, refurbishments and “the modernisation” of the Smart Shopper loyalty programme.

For the full year to February 25 2018, group turnover was up 5.3% at R81.6bn while trading profits grew 4.9% to R1.8bn.

Thursday’s share price gain was mainly because of the fourth-quarter performance and indications that momentum had continued into the new year, said Daniel Isaacs, an analyst at 36One Asset Management.

“Everything else was pretty much in line, and maybe the bottomline number [for the year] was even a bit below consensus,” Isaacs said.

Meanwhile, Brasher said products distributed through centralised depots rose from 60% to 68% of total volumes.

“I believe we’ll need another depot to the north of Johannesburg in, let’s say, 18 months,” Brasher said, adding that the centralised distribution model would ultimately yield savings.

Pick n Pay’s profits from 49%-held Zimbabwean associate TM Supermarkets leapt 45%.

Brasher said positive political changes in Zimbabwe and SA had not yet lifted sales, but Pick n Pay and its partner in Zimbabwe were “positive about the opportunities” in that market.

Asked whether Pick n Pay would increase its stake in TM to above 50% if Zimbabwe relaxed its indigenisation rules, Brasher said “it would be wrong for me to speculate”.

In West Africa, the group was “becoming more confident in the manner in which we want to expand into the next country”.

Pick n Pay saw “a great opportunity” with its local partner in Nigeria and was likely to enter the market with a new “offering and format”.

In SA, Pick n Pay would announce more financial services offerings later in 2018, Brasher said.

It provides money transfer services via a partnership with Commonwealth Bank of Australia and offers credit via a tieup with RCS. Since the launch of the store card in September 2017, R1bn in total credit had been granted, though customers had used less than R200m of the total credit facility.

So the big question about Steinhoff’s foray into the Cape Town residential market is this: how did it pay for the block of super-luxurious flats it bought from former CEO Markus Jooste and his banking friend Bernard Kantor?

Did it pay cash or did it use shares to fund the deal uncovered by Moneyweb?

Steinhoff hasn’t responded to questions from Business Day, but for a few months there have been rumours that Steinhoff shares were used to pay for the Cape Town property — in which case, in an unusual break from recent developments, Steinhoff shareholders have scored from the deal.

There’s no doubt the property has maintained its value far better than the Steinhoff shares. Of course, to the extent that Steinhoff shareholders are better off, Kantor and Jooste are worse off.

That those two individuals might emerge on the wrong side of a deal hardly seems credible.

So reports of a share payment might just be urban legend. The issues around Steinhoff generally seem so incredible and the availability of information to date so slight, the whole story inevitably lends itself to urban legend.

Another question around the property deal is: what was the price tag?

And exactly what valuations did the board of Steinhoff’s property division rely on when it approved the transaction?

Also, what measures did the board take to ensure it was an arm’s-length transaction?

As Moneyweb points out, the property represented an unusual venture for Steinhoff.

The whole story provides a fascinating glimpse into the private wheeling and dealing by our captains of industry, a group of individuals you would have thought had enough on their plates running very large and complex organisations.

Anyway, Investec, which financed Kantor’s involvement, says it is satisfied there are no breaches of its robust policies governing conflicts of interest.

Labour unions will be glad to hear Pick n Pay won’t be rolling out self-service checkouts any time soon.

Pick n Pay piloted a self-service checkout at a Cape Town store in 2016 and unions protested that this would lead to job losses if it went mainstream.

CEO Richard Brasher says the concept is “interesting” and that Pick n Pay learnt from the pilot. “It’s always important for retailers to test technology.”

Brasher is a former board member of Tesco, the UK retailer that is moving towards cashier-free stores. But it’s a less attractive proposition in SA.

“Given that we’ve got large numbers of people and high levels of unemployment, it’s not a priority in our life,” he says. “It works better in Switzerland where there’s nobody there and all of them are bankers.”

Rather, Brasher says he wants to find “more efficient ways of getting people through the checkout”.

Pick n Pay has introduced tap-and-go machines at all of its checkouts, which makes payments below certain thresholds far quicker. “We will focus more on moving people through the tills more quickly rather than necessarily moving people off the tills,” he says.

Considering SA’s unemployment rate, that’s good news. We’re also one of few countries where it’s still normal for customers to chat to cashiers while they’re at the till, which means we won’t lose the human element to shopping. It’s a concept better suited, then, to other, less friendly markets.