Pick n Pay enlists new strategy, set to raise capital after big loss

Pick n Pay CEO Sean Summers has moved swiftly to turn around Pick n Pay supermarkets, with new management structures already in place, while a new “back-to-basics” strategy has been formulated. SUPPLIED.

Pick n Pay CEO Sean Summers has moved swiftly to turn around Pick n Pay supermarkets, with new management structures already in place, while a new “back-to-basics” strategy has been formulated. SUPPLIED.

Published May 28, 2024


Pick n Pay has embarked on a new strategy to restore it’s core Pick n Pay supermarket business to profit after its R3.2 billion taxed loss for the year to February 25, and plans for a R4bn rights issue and the listing of Boxer in November are in full swing, CEO Sean Summers said yesterday.

Summers, interviewed at the release of results yesterday, said it was still early days for their new six-point multiyear strategy.

Although the results were a “disappointment”, he said it was made clear upon his re-appointment in December that the group was “under duress” after years of steady decline in the core business.

He said early indications were “encouraging”. Regarding the rights issue, he said the Ackerman family indicated they would follow their rights, and talks were held with other major shareholders, which had appeared to be well received.

Parts of the strategy had already been implemented. For the first 10 weeks of the 2025 year, there had been positive like-for-like growth by Pick n Pay, alongside a consistently strong performance from Boxer, he said.

In the year to February 25, there was a substantial trading loss in the Pick n Pay business and a strong performance from Boxer. A much higher interest charge resulting from increased gearing, and a R2.8bn non-cash store asset impairment in the Pick n Pay business also further impacted the results negatively.

The trading profit fell 87.4% to R385 million, reflecting a R1.5bn trading loss for Pick n Pay (2023: R1.3bn profit) and a R1.9bn (R1.8bn) trading profit for Boxer.

The Pick n Pay trading loss was primarily driven by flat (+0.3%) sales, trading expense growth exceeding sales growth, and gross profit margin contraction. Net interest paid increased 198.8% to R701.8m.

Summers said it was a three-year turnaround strategy. “We have a strong operational leadership team,” he said. About R1.3bn worth of benefits were targeted over three years by reducing costs.

He said there would be costs to move staff from one store format to another – Pick n Pay traditionally pays good benefits such as 11 months maternity leave, and staff moving to other stores would get an ex-gratia payment for the loss of these benefits. There may be limited retrenchments from closures where staff could not be moved to other stores, said Summers.

He said the “back-to-basics strategy” had six priorities and would focus on simplicity, quality, affordability and sustainability.

The six priorities of the new strategy were leadership and people, resetting the store estate, improving the offer to drive sales, optimising the operating model, recapitalisation, and leveraging the strengths of partnerships.

Earlier this year, Pick n Pay put a new, simplified and seasoned leadership team in place. Stronger structures were in place, including establishing regional trading areas with local decision-making.

Each operating region now had a regional buying team and store-management team in place to meet specific customer needs particular to that region.

Resetting the store estate involved creating a smaller but more profitable Pick n Pay store estate. Strategic conversions aimed to lift store profitability: selected Pick n Pay stores would be converted to Boxer, while franchisees would be secured for other stores.

Multiyear loss-making stores that were unsuitable for conversion to franchise or Boxer would be closed.

There would be a refocus to improve the offer and drive sales. Restructured commercial teams – under new senior leadership – would reset and close gaps in the ranges matched to customer preferences, particularly fresh produce and private label ranges.

Store-management teams and staff training would be strengthened, including using multiskilling.

Through the recapitalisation plan, more than R500m in annual interest savings was being targeted and more than R1bn from working capital optimisation and a once-off cash inflow from store disposals.

He said Boxer’s listing was would unlock the value of the Boxer asset for Pick n Pay and its shareholders, and would allow Boxer to achieve its long-term growth potential. Boxer already operated autonomously from the group, barring some small back-office functions.

Group net debt increased to R6.1bn at year-end versus R3.7bn last year.