AUSTRALIA'S WOOLWORTHS SET TO CHALLENGE NEWCOMER PICK 'N PAY.

SYDNEY, Sept 3 Asia Pulse - Major grocery chain Woolworths Ltd (ASX: WOW) has issued a price challenge to new supermarket entrant Pick'n'Pay, and said Woolworths may even overtake market leader Coles Myer Ltd (ASX:CML) within two years.

Woolworths said it would consider buying the K-Mart and Target chains if the cumbersome Coles Myer giant were to be split-up, and assured investors that Woolworths was relatively fireproofed against a global downturn.

Last week Woolworths posted a bumper 17.7 per cent jump in annual net profit, and predicted continued double digit growth this financial year.

In June, however, South African giant Pick-n'Pay snapped-up a parcel of Franklins stores with a view to an eastern seaboard assault on the niche discount market.

But Woolworths chief executive Roger Corbett described the South African's foray into Australia as "courageous" and signalled a bloody price-war.

"I think that Pick'n'Pay have made a very courageous move ... I think it's quite a risky move for Pick'n'Pay but they're good operators and we're certainly not taking them lightly," Mr Corbett told the Nine Network.

"Certainly we're going to be very competitive and we are going to be sure as we have been for (German discounter)Aldi that they can't do anything for their customers that Woolworths won't do for theirs in a better way."