* New CEO starts work in February 2013
* Pick n Pay shares jump nearly 7 percent
* Pick n Pay looking to regain market share
(Adds analyst comment, updates shares, adds background)
By Tiisetso Motsoeneng JOHANNESBURG, Oct 3 (Reuters) - South Africa's Pick n Pay
named the former head of Tesco's UK business as its new chief executive on Wednesday, as the country's No.2 grocer struggles to regain market share and fend off competition from U.S. giant Wal-Mart.
Shares of Pick n Pay rallied nearly 7 percent after it said Richard Brasher, a Tesco veteran of 25 years, will take over in February, ending a roughly seven-month search for a new chief executive.
Brasher will take charge of a retailer that has lost market share to domestic rivals and is now facing further pressure from Wal-Mart Stores Inc .
"It's major coup for Pick n Pay, particularly as the competitive environment heats up," said Natalie Berg, an analyst at London-based consultancy Planet Retail.
"It's clear that his expertise in going up against Wal-Mart in the UK, which is the most competitive market in the world, was the most obvious attraction to Pick n Pay."
Brasher left Tesco in July this year after a shock profit warning prompted group CEO Philip Clarke to take a hands-on involvement in the UK business.
Wal-Mart, the world's biggest retailer, last year took a 51 percent stake South African discounter Massmart . It has since been on an aggressive push to increase its grocery business.
Pick n Pay has focused on rolling out new distribution centres and a loyalty card programme in the hope of boosting profitability and sales. However, it has been squeezed as its rivals roll out more new stores.
It has trailed behind other South African retailers in terms of profitability. The company's return on equity over the last 12 months has been 33 percent, below the average of 41 percent for eight of its rivals, according to Thomson Reuters data.
Its operating margin over the last five years has averaged just 3 percent, less than half of the average of its rivals over the same period.
As a result, its share price has missed out on the recent bull run by South African retailers, which have been lifted by expectations of strong growth across Africa.
Shares of Pick n Pay have been the worst performer of nine major South African retailers over the last two years, gaining just 8 percent.
By contrast, top performer Mr Price added 144 percent during the same period while Woolworths Holdings
surged 139 percent.
The stock was booted from the Johannesburg Stock Exchange's blue-chip Top-40 index last year, while Mr Price and Woolworths have been since added.
Pick n Pay's former head, Nick Badminton, stepped down in February while the company was still in the midst of a restructuring drive, leading to some speculation about tension among Badminton and the family of founder Raymond Ackerman, which still controls the business.
Shares of Pick n Pay were up 5.3 percent at 46.67 rand at 1231 GMT, after earlier rising nearly 7 percent. It was the top percentage gainer on the Johannesburg All-share index and on track for its biggest one-day gain since 2009.
($1=8.3679 South African rand)
(Additional reporting and editing by David Dolan; additional editing by Mike Nesbit)
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