Pick n Pay has put a hold on rolling out new stores and rebranding existing ones until March, as the retail giant’s new leadership team charts a strategy to give more power to newly appointed regional heads.
This week CEO Sean Summers, who rejoined the company three months ago after a 17-year interregnum, made changes to the top management team who will lead the fight to regain market share.
He appointed new regional heads, brought back three former managers to lead key areas and created the new position of managing executive of the retail division — to be filled by Dallas Langman.
When Summers rejoined, Pick n Pay was in the process of implementing its “ekuseni” (new dawn) strategy, which included rebranding some stores as QualiSave outlets that target the middle-income market. The Pick n Pay brand went head to head with Checkers in trying to lure the premium sector.
That strategy is not yielding results. The brands recorded disappointing sales as they struggled to compete.
On Friday Summers said the management team had temporarily frozen Pick n Pay grocery store rollouts and revamps. “We want to work out exactly, strategically, how we are going to go forward as a company. What we are going to do with Pick n Pay, QualiSave, and franchise stores. So all that is receiving our attention at this moment as we formulate a plan.”
There was limited refurbishment taking place at Pick n Pay stores, but capital has been devoted to the Boxer discount chain and Pick n Pay Clothing, which are continuing with store rollouts.
Summers said he had initially assessed all aspects of the ekuseni strategy but "[it became] apparent to me that before we even got to that, I needed to have a management infrastructure in place across the country that would then allow us to execute on that plan. Where Pick n Pay has fallen behind was that we didn’t have an adequate management infrastructure in the field.”
There was a critical shortage of skills at the retailer, he added.
“There was largely reallocation of duties and moving people back into positions that they would be better suited for. We have brought back up to three people that left the company during the voluntary retrenchments to fill specific areas.”
These are marketing, buying and regional operations.
Sasfin Wealth senior equity analyst Alec Abraham said the decision to freeze the rebranding process was prudent.
“There’s no point in spending on a strategy that may be reversed. I think a review of the group’s store estate and closure of underperforming stores will be an important feature of a co-ordinated and comprehensive turnaround plan.”
Abraham said that achieving profitability probably required a heavy hand in pruning store estate, but “there is also probably a need for balance because I would imagine Pick n Pay wouldn’t want to give up too much space as it has lagged its peers in terms of store openings in recent years”.
Where Pick n Pay has fallen behind was that we didn’t have an adequate management infrastructure in the field.
— Pick n Pay CEO Sean Summers
Casparus Treurnicht, portfolio manager and research analyst at Gryphon Asset Management, said the QualiSave concept was “fairy dust” and Pick n Pay tried to bring innovation to stores that desperately needed revamps.
“I know of stores that performed brilliantly simply because there were laid out very well and had a modern look and feel to them. I think the QualiSave rebranding exercise was all a publicity stunt when originally announced. We all know that Pick n Pay’s problems lie in their logistics and getting people through the store and successfully making purchases and walking out with a smile,” Treurnicht said.
Pick n Pay said the new management team will carry out an immediate structural adjustment to allow the group to focus on customers, buying, store execution and the store estate. The new retail division headed by Langman will be a stand-alone business that includes franchises.
“This will mean that the actual trading in franchise will fall under retail, which is where it should be,” said Summers. “The customer will now see one Pick n Pay with the same execution and the same operational standards as corporate-owned stores. It will now be a seamless experience for customers.”
Langman has been with Pick n Pay for 34 years and was most recently managing executive of the rest-of-Africa division.
Summers also appointed five regional heads to “get much closer to customers,” he said. The regions are where trading decisions will now be made.
He said a greater regional focus was important because customer needs were different based on where they live. Over the past year, there has been a lot of centralisation of the organisation at head office, and “we have lost our ability to operate effectively across the geography of the country”.
South Africa’s nine provinces could not be regarded as homogeneous, Summers said. “You need to have regional intellect to execute regionally and to manage business regionally.”
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