| Mon 30 Jun 2003, 9:42 | | Pick 'n Pay counts cost of extortion bid |
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Pick 'n Pay counts cost of extortion bid
June 30, 2003
By Nicky Smith
Johannesburg - The sensational letter from Pick 'n Pay's chief executive, Sean Summers, to consumers that the retailer had been held to ransom for the past seven weeks would have significant costs for the company, Summers said last night.
"This will cost us a lot of money; it has been enormous," he said. "We have taken out adverts in every newspaper and gone on radio and television.
"But the costs are irrelevant - significant, but irrelevant. At this stage, customer safety is the most important thing."
Summers added that there would be an initial drop in customers at the supermarket chain's shops.
Pick 'n Pay had remained mum about the threats for seven weeks, until a woman on Friday bought "funny tasting" sardines at one of the company's stores.
She was now reportedly fine, and Peter Grealy, a partner at legal firm Webber Wentzel Bowens, said that for Pick 'n Pay to face any legal damages it would have to be proved that it had not taken reasonable steps to prevent harm from happening.
In his letter, Summers detailed how for the past seven weeks the company had been negotiating out of the public eye with an extortionist who had sent a parcel with allegedly poisoned pilchards, sardines and garlic flakes.
Syd Vianello, a retail analyst at BoE Securities, said the company's share price would fall on the news.
"But this would be a natural reaction," he said. "People would be afraid to go to the stores. The real worry is, where is this coming from?"
Patrice Moyal, a fund manager at Corpcapital, said consumers should take some comfort from the fact that this had happened at Pick 'n Pay
.
"If this had happened with some rubbish brand, then people could really be worried, but Pick 'n Pay is a good brand," Moyal said.
"I don't really see how this will hurt the company from an earnings point of view; its numbers can absorb this.
"Sometimes this sort of thing makes people rally around a brand." He explained that this sort of publicity could actually work in Pick 'n Pay's favour.
The supermarket chain has taken the three targeted products off its shelves at all of its Gauteng stores.
"We will tally up the bill in the coming weeks," Summers said.
He added that this was not the first time he had heard of local businesses being held to ransom.
"[But] this is the first time this has happened to Pick 'n Pay," he said.
The retailer in April reported full-year results to February, which showed that its margins had dropped from 3.3 percent to 2.9 percent.
Net profit was R454 million and revenue rose 39 percent to R26.1 billion.
Headline earnings a share were less than the estimated R1.05, at 98.2c.
According to news service Bloomberg, Pick 'n Pay's forecast for headline earnings a share for the full year to February 2004 is R1.24, but estimates may change after yesterday's news.
Pick 'n Pay's share price lost 4c to close at R13.56 on the JSE Securities Exchange on Friday.
