Retail giant Pick n Pay faces lawsuit of Rs 38 mn; to appear in Mauritius court in Oct
Driving away other tenants at the mall because of its ‘lackluster performance’, the court papers note that the South African conglomerate abruptly closed its store on 01 January this year without prior notice, and by dint of simply emailing the mall`s owner the afternoon before the shop was closed down. (Image: Business Report)
Pick n Pay will appear in court on 06 October, following a lawsuit of Rs 38 million where it stands accused of dishonest business practices over a failed store in the north of the island.
The owners of the Mont Choisy shopping centre filed a case with the Supreme Court of Mauritius in June where the shopping centre management accused Pick n Pay of failing to pay rent of about Rs 560,000 per month for more than a year.
Despite signing a 10-year lease, Pick n Pay closed it doors after only 13 months, favouring its other stores, claim the owners of the Mont Choisy shopping centre, who also allege that the South African departmental store chain supplied sub-standard and limited product lines, including stale vegetables and ‘bad meat’.
This, according to court papers filed by Mall of Mont Choisy Ltd, is proof of “the bad faith which Pick n Pay showed all along.”
Driving away other tenants at the mall because of its ‘lackluster performance’, the court papers note that the South African conglomerate abruptly closed its store on 01 January this year without prior notice, and by dint of simply emailing the mall`s owner the afternoon before the shop was closed down.
“This is one of the most shocking acts of illegal behavior of a South African congromerate in Mauritius, where dealing with them was an atrocious nightmare,” said Alain Rey, the CEO of the shopping centre, Mall of Mont Choisy Ltd.
According to court papers, the Mall of Mont Choisy is claiming damages and lost income from Pick n Pay which amount to Rs 10 million in rent and interest of Rs 19 million for additional store fit-out costs incurred at the South African retailer`s request.
Additionally, Rs 8.7 million is also requested for the loss of rental from other potential tenants, and Rs 360,000 in damages for allegations which Pick n Pay is said to have made against the owners. The company is also claiming unspecified future lost earnings.
Alain Rey further said that, last December, Pick n Pay offered a compensation equivalent to Rs 3.2 million which they rejected as inadequate.
For its part, Pick n Pay refused to comment on the court action, saying that the matter was sub-judice, nor did it provide copies of its responding court papers.
The Mall of Mont Choisy decided to develop the shopping centre near Grand Baie, a tourist and residential area, in May 2010.
Several other companies, including Shoprite and another large Mauritian retailer, were apparently interested in being the anchor tenant but an agreement was signed with Pick n Pay because of its reputation and experience.
The agreement, according to Alain Rey, was for a 10 year lease with a no-termination clause, which was later signed in April 2011.
“The company would never have considered borrowing and investing in a convenience centre, indeed would never have obtained the necessary finances from the banks to do so, if it was not for the security of a knowledgeable, successful and serious anchor tenant, with the guarantee of a 10 year without termination contract,” the court paper mentioned.
Actually, the company borrowed the equivalent of Rs 154 million to finance the development.
Construction of the mall started in March 2012 and was completed in November. The mall included the 3000 m2 of Pick n Pay, which was opened the next month.
However, almost from day one, the mall owners claim Pick n Pay offered a sub-standard service proposition.
“There was a downward spiral in the footfall at Pick n Pay, and consequently, the service at the centre,” the court paper reads.
In its first month of operation, according to figures in the court document, an average of 775 shopped at the Pick n Pay daily. But the figure had dropped to about 400 at the end of its first year of operation.
Over the same period, monthly turnover at the store declined from an opening-month high of Rs 5.4 million to a low of Rs 1.69 million.
Apart from the Mall of Mont Choisy Ltd, Pick n Pay seems to be struggling with its presence across the island.
Two of its stores – at the Bagatelle Mall of Mauritius and Cascavelle Shopping Village respectively – have already been taken over by Compagnie des Magasins Populaires (CMPL), under the brand name of Monoprix.
At the start of the year, in January 15, 2014, the Board of Directors of the Compagnie des Magasins Populaires (CMPL) gave its approval for the purchase of two hypermarkets of Pick n Pay by its two subsidiaries – CMPL (Bagatelle) limited and CMPL (Cascavelle) Limited.
Both hypermarkets are branded under the franchise Monoprix and have opened shop in Bagatelle Mall of Mauritius and Cascavelle Shopping Village respectively.
Source: Sunday Times, South Africa