Franchise Talk

PnP Still Struggling In Aus

April 21st, 2006 | Author: Jack

Cape Town – Like all other grocery retailers, supermarket chain Pick ‘n Pay felt the benefit of a booming economy and high consumer confidence in the year to February.Net profits climbed nearly 11% to R703m and headline earnings per share jumped 17% to 153c despite the negative impact of a strike in June last year and power outages in the Western Cape in December and January.

But perhaps the more important story is the performance of the group’s Australian business, Franklins, which recorded a mammoth R92m trading loss for the year, although the loss in the second half of the year was substantially less than the first half.

Clearly the future of Franklins is on the line for Pick ‘n Pay. Chairperson Raymond Ackerman said Pick ‘n Pay would not fear admitting to having made a mistake if they could not at least bring Franklins to a breakeven point soon.

He declined to put a timeframe on “soon”, but stamped his concern over the business saying: “We don’t like losses.”

CEO Sean Summers said that shareholders could expect to see significant improvements this year as demonstrated by the much reduced trading loss of R29m in the second half.

Competition tough

“We are fully committed to Australia, but we are also realistic about the challenge. Maybe we underestimated some of the obstacles and we are probably two years behind where we wanted to be,” said Summers.

Competition is tough and the stakes are high. In New South Wales, where Franklins operates – largely around Sydney – Coles Myer and Woolworths (not related to Woolies in SA) opened 27 stores over the past year compared with the one store opened by Franklins.

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