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Pick ‘n Pay Stores could rebrand its loss making mass-market Score supermarkets with the stronger Pick ‘n Pay trade name that consumers preferred, said analysts.

May 2, 2007

By Tom Robbins

Durban – Pick ‘n Pay Stores could rebrand its loss making mass-market Score supermarkets with the stronger Pick ‘n Pay trade name that consumers preferred, said analysts.

This followed comments by Pick ‘n Pay Stores that it was re-evaluating the future of its 127-store Score chain following five years of losses.

Last week, the company said it had reversed an accumulated tax asset of as much as R46.4 million at Score after the chain again failed to turn a profit in the year to February.

Pick ‘n Pay Stores chief executive Nick Badminton said the supermarket group had yet to make a decision on the future of Score, but he added that research had shown consumers in the middle to bottom end market segments had a strong affinity for the Pick ‘n Pay supermarket brand.

Mark Ansley, a portfolio manager at Cadiz African Harvest, was puzzled as to why the retail group continued to operate two supermarket chains and did not convert Score stores to Pick ‘n Pay supermarkets, given the strength of the Pick ‘n Pay brand.

Ansley questioned why township residents who were now exposed to supermarket brands in central business districts and shopping malls would not want to shop at the same stores on returning home.

Rhynhardt Roodt, an analyst at Investec Asset Management, said the retail group’s management realised the strength of the Pick ‘n Pay trade name. Converting to this brand was the way to go.

Roodt questioned why the supermarket group had both the Score and Boxer brands operating in the middle to lower market segment, adding that the successful Boxer chain had more experience of this target market.

But Boxer stores are concentrated in the poorer rural Eastern Cape and KwaZulu-Natal markets, and extending this brand across the country’s urban townships may pose some challenges.

Roodt said while Pick ‘n Pay supermarkets were successful at the top end, Shoprite Holdings’ Shoprite stores were very strong at the lower market segment.

He said while the very bottom end of the market was buying up, the bottom end continued to grow as it gained market share at the expense of informal traders.

Barbara Price-Hughes, a research analyst at BoE Private Clients, said apart from rebranding Score as Pick ‘n Pay supermarkets, the company had the option of selling it. She added that it had valuable properties.

But Price-Hughes said Pick ‘n Pay could also “cherry-pick”, keeping the best Score stores and converting the rest.

Badminton said the firm would invest R1.25 billion in the current financial year phasing in its centralised distribution systems and opening 66 new stores, including its first hypermarket in Soweto.

Pick ‘n Pay Stores closed 39c lower at R35.30 on Monday. The food and drug retailers sector climbed 0.22 percent.