When Sean Summers reassumed the position of CEO at troubled former retail icon Pick n Pay he soon realised that turning this once great business around would be a labour of love, and that it would involve blood, toil, sweat and tears.
Summers is a realist, and he has tried hard to impress upon the market that rescuing Pick n Pay from the abyss will be a monumentally difficult task. In the most recent results presentation he paraphrased the late English conservative philosopher Roger Scruton, who said good things are easily destroyed but not easily created.
That sentiment could easily be applied to Pick n Pay, which was lovingly nurtured over many decades by Raymond Ackerman (and Summers in his first tenure as CEO), but which rapidly fell apart and was almost destroyed in the years after Summers’ departure in 2005.
In the about 18 months that he has been fully back at the helm promising signs have emerged that a gradual turnaround is materialising. And of course, with the proceeds of the rights issue from last year with the funds released by the Boxer listing, it would be surprising if it hadn’t turned around to an extent.
But there’s a still a long way to go, and management is indicating that financial 2028 will be the year of break even. Thankfully for the group, Summers has extended his contract for the next three years, which should coincide with a return to bottom-line profitability.
He likens the Pick n Pay turnaround process to attempting to reawaken muscle memory in an athlete who has stopped training and turned to flab. It’s a painfully slow process, physically and mentally, but if the body isn’t exercised regularly and relentlessly it will soon fall back into its sloppy old ways.
Pick n Pay has been recapitalised in record time, and though it is still reporting serious bottom-line losses improvements further up the income statement are more evident. For the 53 weeks to March 2 group turnover was R118.6bn, a 5.6% improvement over the previous 52-week period. Comparing 52 weeks to 52 weeks gives a 3.2% rise in turnover.
This wasn’t especially impressive, particularly if measured against other JSE-listed food and drug retailers’ performance. And if Boxer is carved out of the equation the Pick n Pay supermarkets in effect experienced static turnover growth last year. But this figure includes the impact of closing 40 loss-making stores.
Gross profit margin improved by 30 basis points or R1.5bn to 18.4%, while total expenses only rose 1.9%. Trading profit rose by 110 basis points or R1.4bn to R1.8bn, and the attributable loss before tax was R700m, a turnaround of R2.6bn from the previous year. There was net cash of R4.2bn on the balance sheet compared with net debt of R6.1bn the previous year. There was a headline loss per share of 61.54c, an improvement of 64.3% on the previous year.
Apart from Boxer, Pick n Pay’s clothing business also continued to perform well and ahead of the market, though the group remains coy about giving full transparency on this business. Yet, with 400 stand-alone stores in the portfolio it is a force to be reckoned with.
Further bottom-line losses are likely in financial 2026 and 2027, and only in financial 2028 is a return to bottom-line profitability expected. Using the muscle memory metaphor Summers has alluded to, Pick n Pay can be compared to a once-great former athlete who has been lapped by a highly toned Shoprite trail runner.
It is gradually recovering and gaining momentum, but for the next two years we know Pick n Pay is likely to remain in a loss-making situation, and even in financial 2028 growth in headline earnings per share is unlikely to be explosive.
• Gilmour is an investment analyst.
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