By Nqobile Dludla

JOHANNESBURG, (Reuters) – South African clothing and grocery retailer Pick n Pay plans to reduce costs by $3 billion rand ($187M) over the next three-years and increase its market share of 3% through a new strategy. CEO Pieter Boone announced Tuesday.

A major retail chain in the nation is looking to increase shareholder returns. Shareholder returns have dropped in the past 12 months due to a fiercely competitive market that has been dominated by Shoprite, the largest rival.

Lerena Olivier (Group Chief Financial Officer) stated that the cost savings would be realized through efficiencies within supply chain and working capital. This was after Pick n Pay had reported a rise of annual earnings.

It is looking for more customers to visit its Boxer supermarket chains, mid-range Pick n Pay shops in a very competitive market.

Boone explained to investors that it plans to open 200 Boxer shops and expand its product offerings at Pick n Pay to better service the affluent and lower- to mid-income customers through two Pick n Pay brands.

Boone explained that “We’ve tried to please everyone” and ended up “losing relevance and differentiation”. Boone was referring specifically to the difficulties of servicing all customers from one brand.

MARKET SHARE

According to him, the retailer is also looking for more online customers by investing in its ecommerce business. He said that this will translate into eight-fold sales growth within its financial year 2026.

Pick n Pay will also deliver group turnover growth at a compound rate of 10%. This should result in market share growth below 3% by 2026. The company has also promised to grow its profit before taxes margin from the current 2% to above 33% by 2026 and to double Boxer sales.

Boone noted that South Africa’s formal food-and grocery markets are expected to grow by 227 billion rand ($14billion) to 855billion rand by 2026. Most of the growth will come from those with lower incomes.

“Today, we currently have 16% market share in formal markets. He said that there is opportunity everywhere, but particularly in the lower-income market.

A 3.5 billion rand capital injection for 2023 will help support the company’s growth efforts. Olivier explained that Capex will stay at this level over the medium-term.

The headline earnings per share of the group, which is the primary profit measure in South Africa for South Africa, was 262.59cs, compared to 229.31cs during the prior comparable period.

Pick n Pay’s 1,900-plus national stores have announced a deal with Takealot-owned ecommerce firm Naspers. Customers will be able to order groceries and liquor through Takealot’s food delivery Mr D App. It will go live in August.

($1 = 16.0011 rand)