Pick n Pay turnaround appears, at first glance, to be gaining traction. The company narrowed its annual pretax loss to R237m in the year to the end of March, a sharp improvement from the R1.4bn loss in the previous year.
The company cites a 64% reduction in core supermarket losses and points to green shoots such as 5.6% turnaround growth. Yet it is hard to ignore how Pick n Pay is heavily leaning on one bright spot — Boxer — while the core business remains on wobbly footing.
Packaged optimistically, the financial performance underscores how far the retailer has to go. The reduction in losses was achieved largely by aggressive cost cutting and a massive R12.5bn recapitalisation that raised cash through a rights issue and the partial listing of Boxer. Even after slashing costs, the flagship Pick n Pay supermarket division is still deep in the red with more than half a billion rand trading losses.
Management’s boast that the results are “exactly where we said we would be” invites scepticism: meeting a low bar is hardly a victory when rivals are sprinting ahead. Shoprite grew sales by more than 10% in the latest year-end results, while Pick n Pay could only muster anaemic low-single-digit growth. Holding prices low to lure shoppers helped prevent an exodus, but it left profit margins wafer-thin in an industry grappling with rising costs from fuel to security. In truth, Pick n Pay’s recovery still looks fragile and financed rather than earned.
Much of Pick n Pay’s apparent progress rests on the shoulders of Boxer. Its discount chain posted a blistering 13.2% sales growth and contributed R2.3bn trading profit, effectively propping up the group. By contrast, the core Pick n Pay eked out just 1.9% sales growth and remains loss-making. Boxer made a sparkling JSE debut late last year, valuing it at more than R28bn and catapulting its market capitalisation above that of Pick n Pay itself. This dynamic is both a blessing and a warning sign. While the Boxer rollout brings in cash and customers, it highlights the weaknesses of the core brand.
Boxer’s strength in underserved townships and rural areas is commendable, to be sure, but it raises the question: is Pick n Pay conceding the middle-income market to competitors? As Pick n Pay closes one in 10 of its flagship supermarkets to stem losses, competitors such as Checkers — Shoprite’s upmarket banner — waste no time scooping up the territory. Leaning on Boxer has bought Pick n Pay time, but it’s not a long-term substitute for fixing the core supermarket formula.
CEO Sean Summers admitted that the path to profitability will take longer than initially envisioned — an understatement, as the break-even target has now been pushed out to the 2028 financial year from a previous 2027. The extension is a red flag wrapped in careful justifications. Summers argues the strategy is to “build retail muscle memory” for enduring success, favouring long-term fixes over quick wins.
It’s a noble sounding approach, in fairness, but stretching investor patience by delaying profit recovery also smacks of necessity: the hole was simply deeper than management thought. Every extra year to break even is another year of potential macroeconomic storms — from stubborn inflation to consumer belt tightening and load-shedding — that could knock the plan off course. By 2028, the retail landscape will not be standing still. Market leaders could even be stronger, new competitors might emerge and customer loyalties harden. The upshot is that a slow-cooking turnaround risks coming out half-baked.
As the grocer plays the long game, one provocative question looms: come 2028 will Pick n Pay be a revitalised contender standing on its own two feet, or just a diminished brand still leaning on Boxer’s strength to stay upright? The answer will determine whether this storied retailer has truly turned the corner, or is merely walking circles while rivals race ahead.
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