Charlotte Mathews

Consumer Industries Editor

CAPE TOWN — Supermarket group Pick ’n Pay Stores has doubled its planned capital spending for the current year to R601,7m from R318,6m last year.

The company will be investing in new stores and refurbishments and implementing new computer systems over the next two years, according to its latest annual report, released on Monday.

CEO Sean Summers said nine new supermarkets were planned for the current financial year, although management would be careful about site selection to avoid overtrading.

The group plans to open six new hypermarkets over the next three to four years, 10 new franchise stores this year, and will expand the clothing and liquor formats.

Score Supermarkets will be investing in store automation and back office systems, and converting its operational systems to SAP. Boxer Superstores will open another six stores this year and roll out in-store scanning while continuing to refurbish stores.

In Australia, Franklins will launch its franchising business this year and three new corporate stores will be opened.

All the group’s capital spending will come from its internal cash flow. In the year to February the group’s trading operations generated R1,3bn in cash.

The group recently reported a 20,6% increase in headline earnings a share for the year compared with last year. Chairman Raymond Ackerman said although it was difficult to manage a business in an environment of low inflation, the challenge had been counterbalanced by increased levels of spending across most categories of consumer goods.

Ackerman attributed the growth in the economy to good management of the macroeconomic environment by the treasury and the Reserve Bank.

"They have consistently demonstrated that appropriate economic policy is in place," he said.

The second factor fuelling growth was that a degree of empowerment had taken place in SA, he said.

"Employment equity programmes have had an impact and have provided opportunities among young urban populations that have generated economic prosperity".

Although increases in the oil price threatened SA’s low inflationary climate and low interest rates, Ackerman said he was confident that appropriate policies by the Reserve Bank and the treasury would maintain current spending levels.

The group’s internal measure of food inflation was showing a marginal movement upwards, but major movements were not expected. Management would continue to focus on growing sales, containing costs and improving efficiencies in the business.

Pick ’n Pay shares have gained 50% in the past year to about R24,80 at present, slightly underperforming the food and drug retailers’ index.

The index has risen 55% in the same period, driven largely by a rerating of Pick ’n Pay’s rival, Shoprite Holdings.