South African Retailer Pick n Pay plans to come into the Nigerian market through a joint venture with AG Leventis, as it seeks to reduce its reliance on its home market.
Like many other South African companies, it wants to expand further across the continent amid sluggish economic growth at home.
The retailer, which reported a 26 percent jump in annual earnings on Tuesday, said it would take a 51 percent stake in a Nigerian joint venture with conglomerate A.G. Leventis , which runs a food business. It did not disclose the size of the investment.
Speaking at the company’s full-year results presentation, Richard Brasher, CEO, Pick n Pay said that there was a dearth of formal players in Nigeria, which represented an opportunity for Pick nPay.
“Nigeria is a country and a market which Pick n Pay cannot ignore in its quest for long-term sustainable growth. The challenge, of course, is how to succeed in Nigeria. We can all point to examples which have not worked.”
He went on to say that Pick n Pay was taking a long-term view of Africa’s most populous nation.
“If you’re in the retail business and you are an African business its hard to ignore Nigeria,” he told Reuters.
Gryphon Asset Management analyst Reuben Beelders said he backed Pick n Pay’s conservative approach to Nigeria.
“People have realised that Africa is not just going to be a pot of gold at the end of the road, it’s a lot of graft and it’s going to need long-term investment rather than something that happens quickly,” Cape Town-based Beelders said.
Pick n Pay has lost ground in South Africa to rivals such as market leader Shoprite, after failing to invest in new stores. But Brasher, a former UK head of Tesco who took over in January 2013, is implementing a plan to win back market share.
Pick n Pay said headline earnings per share (EPS) rose 26.4 percent from a year earlier to 224.04 cents in the year to the end of February, helped by cost-cutting measures. Headline EPS, a measure that excludes certain one-off items, is the profit figure most widely used in South Africa.
The company declared a final dividend of 125.20 cents per share, bringing the year’s total payout to 149.40 cents, 26.5 percent higher than the previous year.
Apart from SA, Pick n Pay currently operates in Namibia, Botswana, Zambia, Mozambique, Mauritius, Swaziland and Lesotho.
