CLAREMONT, South Africa -- Pick 'n Pay here has acquired a 50% stake in a 125-store chain of small supermarkets operating as Score Supermarkets.
Pick 'n Pay, according to local reports, paid about $4.4 million in cash (16 million rand at the commercial exchange rate of 3.65 rand per $1) to Score in the deal, which included Score's Rite Value chain of franchised stores.
Pick 'n Pay also has an option to buy an additional 25%, or up to 75% of Score's shareholding, under the terms of the deal, which was announced at the end of March.
Raymond Ackerman, chairman, said the acquisition fits with the company's plan to move into smaller stores and franchising. It also enables Pick 'n Pay to gain access to more black consumers living in rural areas.
Previously, Pick 'n Pay focused its operating activities in urban areas and large towns. The Score deal will allow the retailer to benefit from Score's rural marketing areas and its smaller, convenience-style stores, the company said.
In another move related to the franchise business, Pick 'n Pay disclosed it intends to develop its own chain of franchised stores, which will carry the name of the owner-operator in tandem with the Pick 'n Pay banner.
Additionally, the company said some older existing Pick 'n Pay stores are being converted into more of a partnership arrangement, with store management or outside investors owning 50% of the equity of individual stores. Pick 'n Pay did not estimate how many existing stores could be converted into such a 50-50 partnership arrangement.
Pick 'n Pay announced the strategic changes at the time it published annual results for the year that ended in February.
The retailer said sales increased 4.1% to $1.8 billion and trading income, or operating income, rose 1.3% to $40.6 million. The retailer reported an operating margin of 2.22% in fiscal 1993, about six basis points less than its fiscal 1992 operating margin of 2.28%
Net earnings increased 13.5% to $28.9 million in spite of lower inflation and continuing tough trading conditions, Pick 'n Pay said. The company said its market share "held steady" at about 33%.
Ackerman told reporters "the modest increase in turnover must be considered in the light of the central statistics figure that retail sales grew by only 0.2% in the year under review. What must also be taken into account is the fact that our own in-house statistics prove that inflation in our company was approximately 4%."