REPORT TO STAKEHOLDERS |
Report to stakeholdersChief Executive Officer's report
Pick n Pay is a great business. But the past few years have been challenging, and this has been reflected in our financial results. I have taken leadership of the business at a time of transition. Transition can be disruptive and costly with no guarantee of success. The key is to have a plan which combines the unaltering basics of good retailing, relentless customer focus, consistent and determined execution and a strong vision for the future. I am very confident on each of these elements and that together we can bring about a new era for Pick n Pay, characterised by growing shared value – for our business, our staff, our shareholders, our stakeholders and most of all our customers. Much of the attention on Pick n Pay has in recent times focused on strategic restructuring – for example in distribution infrastructure, in centralised category buying and in implementing the smartshopper loyalty scheme. Any change of this sort carries cost and a risk of disruption, and we have seen our fair share of both. My task as CEO is to ensure that we replace disruption with direction, and inject the right discipline and determination to make each of these and other changes succeed. By doing this we will strengthen our business, improve our offer to customers and create value. The debate on strategic restructuring and the recent financial performance of Pick n Pay Group should never obscure the enduring strengths of our business, which together make up its powerful, beating heart. We have the most loyal customers in South Africa. They trust our business and want us to succeed. More than half of South African consumers shop regularly with us and our customer numbers have grown over the past year. Through the improvements we are making to our business, through our relentless focus on value, quality and service, and through what is now the largest loyalty programme in the region, customer numbers and sales will continue to grow. Every second our business is open 10 smartshopper cards are swiped in our stores. We have a very strong brand, built on a genuine desire to make life better for our customers. I have spent many hours listening and talking to customers and I have been inspired by their belief in our commitment to making life better for them. We have a very strong and diverse portfolio of stores – approaching 1 000 across hypermarkets, supermarkets, Express, clothing, liquor and Boxer stores. Our trading space grew by 5.2% over the past year, and will grow significantly again over the coming year with more than 100 new stores. This is a key part of my vision: growing the business by opening stores in areas which reflect the changing habits of our customers and which bring new customers and communities into the Pick n Pay family. Pick n Pay can and must be part of the new South Africa’s story of growing wealth, aspiration and access. Commentators on the retail sector often speculate on whether a business occupies the higher, middle or lower ground in their appeal to customers. This is a false debate. The key to success in retail – and the heart of any good business – is to appeal broadly, to exclude nobody, and to move hand-in-hand with customer needs and aspirations. I believe Pick n Pay, with its rich history of inclusiveness and its deep well of customer loyalty, is uniquely positioned to do this in South Africa. I am particularly excited by the performance and the potential of our Boxer stores to reach more customers and enhance lives among the crucial LSM 4 – 7 markets. Every significant retail business in the world is facing the challenge posed by a proliferation of formats and channels – in particular the online market. Through our smartshopper programme, our online business and other initiatives, Pick n Pay is well placed to lead in Africa on the global challenge of developing into a multi-format, multi-channel retailer. We have a strong supplier base delivering quality products for our customers, combined with a deep commitment to helping emerging producers including those who suffered discrimination in the past. I strongly commend the work of the Pick n Pay and the Ackerman Pick n Pay Foundations and the successes they have encouraged, many of which feature in our Goodness campaign as examples of what can be achieved. Ultimately, however, a business is best able to make its contribution to society not just by having the right values but by being commercially successful. If the value of a business grows, the benefits of that growing value will accrue not just to shareholders but to emerging suppliers through greater opportunities and to communities through better service and employment opportunities. I strongly endorse the Pick n Pay maxim, demonstrated over many decades, that “doing good is good business”. My belief is that, in turn, good business, and the growth that flows from it, creates further opportunities to do good. Achieving this virtuous circle is a key part of my vision for Pick n Pay. As a lifetime retailer, however, I am not content to rest on a vision. What excites me is the knowledge that it is only by getting a team organised, bringing clarity, focus and motivation, and having a clear plan – in short by getting busy – that we will turn vision into reality. Over the coming year I am determined that we will succeed on a number of practical priorities. The transition to central category buying will be completed so that customers can benefit tangibly from better products, better prices and greater innovation. The changes to our supply chain will also benefit customers through better availability, fresher products and less cluttered stores. I will also focus the business on transforming the customer experience in-store. Our staff are central to this objective. I have been impressed by the Pick n Pay staff I have met. They will be crucial in this next phase of our journey. Among other things I will be encouraging our office staff to spend more time in our stores, for it is only there that management will be able to live the maxim that if the Company cares about the customer, the customer will care about the Company. I am confident that, through these and other steps, we will deliver significant improvement and growth to our South Africa business. Although the economy remains sluggish, its underlying potential for growth is strong. Our population is growing and is becoming more affluent. As our business strengthens it will be well-placed to benefit from the opportunities generated by a return to sustained economic growth. We have declared our Africa performance separately for the first time. Pick n Pay now generates R2.7 billion sales outside South Africa in eight countries, generating close to R100 million trading profit. This has the strong potential to develop into a second engine of growth for our business. So this too will be an area of strategic focus. I am grateful to all my colleagues in Pick n Pay, from the thousands of staff in our stores through to our Chairman, who have welcomed and supported me since my arrival in February. We have a great business. We have the right plan. We will get busy as a team to deliver the plan. This way we will lead Pick n Pay into a successful new era – to the benefit of our customers, our staff, our shareholders and our wider stakeholders.
Cape Town |
