Despite depressed consumer demand and economic volatility, Pick n Pay, in partnership with Meikles Limited, is expanding its footprint in Zimbabwe with new store openings and development projects. This move contrasts with its reduced operations in South Africa.
Pick n Pay, a renowned South African grocery chain, has been focusing on expansion in Zimbabwe despite facing economic challenges and a decline in consumer demand. In partnership with Meikles Limited, Pick n Pay has opened new stores and is investing in development projects, showing resilience amidst a tough economic climate.
Expansion in Zimbabwe: Pick n Pay’s Zimbabwean partner, Meikles Limited, has announced that it will continue focusing on new development projects for its supermarkets division. This comes despite a significant decline in consumer demand and a 4.8% decrease in units sold for the fiscal year ending February. Meikles Limited is optimistic about adapting to the evolving economic conditions, including the introduction of Zimbabwe’s new currency, the Zimbabwe Gold.
Economic Performance: In the last fiscal year, TM/Pick n Pay stores in Zimbabwe saw a revenue increase of 102% in local currency terms. However, units sold declined by 4.8% due to uncompetitive US dollar pricing for formal retail and depressed consumer demand. The authorities’ control over the in-store exchange rate for formal retail has given informal players, who use higher exchange rates, a competitive edge. Despite these challenges, the units sold in the second half of the financial year recovered by 5.2 percentage points, reducing the full-year deficit from 10% to 4.8%.
Revenue and Costs: Revenue from the supermarkets division, received in foreign currency, was below 20% of the total revenue, which fell short of the 80% average mix of transactions in US dollars within the economy. This discrepancy was due to uneven enforcement of the in-store exchange rate policy. Despite this, TM/Pick n Pay stores maintained gross margins at 23%, though operating costs surged by 110% due to the fluctuating exchange rate for the Zimbabwean dollar.
New Store Openings: During the reviewed period, two new stores were opened in Gwanda and central Harare, funded through operating cash flows. The segment displayed strong working capital management despite frequent changes in supplier trading terms.
Challenges in South Africa: While Pick n Pay is expanding in Zimbabwe, it is simultaneously reducing its footprint in South Africa following a sluggish performance. The company is undergoing a restructuring plan to regain its market position and manage its significant debts. Chairman Gareth Ackerman is set to step down as the company seeks financial stability. Recently, Pick n Pay authorized a R1 billion loan facility from banks, including FirstRand, to address its financial issues. By the end of February 2024, the company’s net debt had increased from R3.7 billion in 2023 to R6.1 billion.
Market Outlook: Market analysts have expressed concerns about Pick n Pay’s financial health, emphasizing the need for immediate cash inflow. Despite the economic challenges in Zimbabwe, the partnership with Meikles Limited demonstrates a strategic effort to capitalize on new opportunities and navigate the complex economic landscape.
">Virgo
Follow on X
