* Nigeria entry in partnership with A.G. Leventis
* First-half earnings down 56.3%
* Earnings hit by coronavirus crisis and one-off costs
* Shares up 3.2%
(Recasts on expansion in Nigeria)
By Nqobile Dludla
JOHANNESBURG, Oct 20 (Reuters) - South African supermarket
chain Pick n Pay PIKJ.J will soon open its first store in
Nigeria through a partnership with A.G. Leventis (Nigeria) in an
effort to tap the West African nation's "underserved" consumer
market.
The push into Nigeria comes as retailers including grocery
giant Shoprite Holdings SHPJ.J and Mr Price MRPJ.J are
withdrawing because of currency devaluations, logistical
challenges and difficulties repatriating profits.
But Pick n Pay still finds the risky market attractive and
is confident of success, a company executive told Reuters on
Tuesday after the company reported a 56.3% drop in first-half
profit.
"The appeal is that it is a hugely underserved consumer
market and is going to grow. You have to look through the short
term and into the long-term potential," said David North, group
executive for strategy and corporate affairs.
North said that Pick n Pay's expansion strategy in Nigeria
will differ from other South African retailers that opened
flagship stores in the large shopping centres.
Pick n Pay will instead focus on smaller neighbourhood
stores, with partner A.G. Leventis providing "the local
know-how, the understanding of the regulatory process and the
local stakeholders", North said.
African markets outside South Africa contributed 2 billion
rand ($120.9 million) to Pick n Pay's revenue in the 26 weeks to
Aug. 30, down 10.3% on last year. Removing the impact of
currency weakness, sales were down 7.3% in constant currency
terms.
ONLINE GROWTH
The retailer, which competes with Shoprite and Spar Group
SPPJ.J , said it had concluded an agreement to buy on-demand
online grocery delivery business Bottles to strengthen its
e-commerce operation.
Bottles was launched in 2016 as South Africa's first
on-demand alcohol delivery app and partnered with Pick n Pay in
2018.
After a prohibition on alcohol sales was introduced in March
to combat the spread of COVID-19, Bottles repurposed its app to
deliver on-demand grocery essentials.
Since pivoting to groceries, the app has achieved more than
700,000 downloads with more than 350,000 registered users,
bolstered by an unprecedented surge in online shopping during
the pandemic.
Pick n Pay's own online sales doubled over the period.
Group sales, however, rose by only 2.6%. Sales from South
African operations increased by 3.4%, constrained by
restrictions on alcohol, tobacco and clothing sales during the
COVID-19 lockdown.
Reduced trading hours, limits on the number of customers in
stores and temporary store closures also contributed to an
estimated 2.8 billion rand in lost sales.
Pick n Pay declared a full-year dividend of 173.06 cents,
having deferred it in May, alongside an interim dividend of
18.74 cents.
Shares in the company were up 3.2% by 1132 GMT.
($1 = 16.5450 rand)