Meikles Limited, the Zimbabwean partner of Pick n Pay, has announced plans to focus on new development projects for its supermarkets division, despite facing depressed consumer demand and a 4.8% decline in units sold for the year ending February 2024.
Pick n Pay, a struggling South African grocery chain, holds a significant stake in TM Supermarkets, the Zimbabwean operator of Pick n Pay outlets. Despite reducing its footprint in South Africa due to sluggish performance, Pick n Pay continues to expand its presence in Zimbabwe.
“The group focuses on adapting to evolving economic conditions, including the new currency, the Zimbabwe Gold,” said John Moxon, chairman of Meikles. “The group will continue with the planned development projects, primarily in the supermarket and properties segments.”
Revenue for TM/Pick n Pay stores in Zimbabwe increased by 102% in local currency terms over the year. However, units sold declined by 4.8%, attributed to “uncompetitive US dollar prices for formal retail and depressed consumer demand” in the Zimbabwean economy.
Moxon noted that authorities controlled the in-store exchange rate for formal retailers, while informal retailers used higher exchange rates, giving them a competitive edge. “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,” he added.
Revenue received in foreign currency for the supermarkets division was below 20% of the total revenue, significantly lower than the average 80% of transactions conducted in US dollars across the economy. This shortfall was due to the uneven enforcement of the in-store exchange rate policy.
Despite these challenges, TM/Pick n Pay stores maintained gross margins at 23%. However, operating costs increased by 110% due to the volatile exchange rate for the Zimbabwean dollar.
During the year, two new stores were opened in Gwanda and central Harare, funded through operating cash flows. “The segment demonstrated resilience in working capital management, in the face of frequent changes in supplier trading terms,” Moxon said.
Meanwhile, Pick n Pay in South Africa is undergoing a restructuring plan to regain market position and alleviate significant debts. Chairman Gareth Ackerman is set to step down as the company recently reported a financial loss.
Market analyst Simon Brown commented that Pick n Pay “is in trouble and needs cash” urgently. In March, the board authorized the grocer to secure loan facilities amounting to $55 million from banks such as FirstRand. As of February 2024, Pick n Pay’s net debt had increased from $204 million in 2023 to $336 million.
