Pick n Pay CEO Sean Summers is a great South African. He talks fast and acts quickly and decisively, and always gets the desired result. He is fiercely loyal to his people and to SA in general. Two years ago, he could have opted to remain in semi-retirement in London, but instead he decided to return to SA and rescue Pick n Pay from almost certain collapse.
The green shoots of recovery are now visible after last year’s recapitalisation and the group is well on its way to achieving breakeven in financial year 2028. But his is an unenviable task and the group that finally emerges from the years of operational and financial transformation will be markedly smaller and leaner than the one that he began rescuing in 2023.
Pick n Pay targets the middle-income market in SA, a demographic whose spending power is being battered from all sides. The lower social spectrum, where its Boxer subsidiary operates, is thriving. At the top end, Checkers and Woolworths Foods are slugging it out for the wealthier consumer rand. It’s instructive to note that even though Pick n Pay closed a net number of stores during the interim period and its main rival, Shoprite, opened many hundreds of new stores, Pick n Pay still managed to achieve a small increase in turnover.
Apart from the slow, measured turnaround at the main Pick n Pay entity itself, there were a couple of really impressive standout features in the form of Boxer and Pick n Pay Clothing. Boxer, which is 65.9% owned by Pick n Pay, turned in a strong 5.3% growth in headline earnings for the six months. Pick n Pay Clothing’s sales rose 12% with like-for-like sales up 7.5%. In a retail clothing market that is still challenged by unfair competition from cheap online retailers such as Shein, Pick n Pay Clothing has proved to be extremely resilient.
For the interim period to end-August, Pick n Pay’s turnover increased 0.1% to R36.3bn, while the net effect of further store closures resulted in like-for-like turnover increasing 4.4%. The trading loss before tax and capital items improved by R700m to R1bn. The group had a headline loss of R439m, down from R803m in the previous interim. Headline loss per share reduced from 136.6c to 59.77c. The balance sheet is healthy, with group net cash reserves of R5.1bn.
Among the strategic initiatives for the year ahead and beyond are strengthening the group’s private-label offering and improving the fresh produce offer. Though Pick n Pay has a reasonably wide range of private-label products on its shelves these are not always aligned with customer preferences. Pick n Pay was always regarded as being a top-class fresh produce supplier until recently. That position will have to be reclaimed.
There is also a major thrust to recruit and train the right kind of staff within the group, as many talented individuals were lost to competitors before Summers took over two years ago.
At the results presentation, an investor asked what had happened to Pick n Pay’s social welfare awareness. Former chair the late Raymond Ackerman instilled an ethos of “doing good is good business” into Pick n Pay many decades ago and that philosophy still exists. According to Summers, there’s an old saying that the hand of the receiver should never know the hand of the giver. This is in stark contrast to Shoprite’s highly publicised range of R5 specials specifically designed to help indigent consumers.
Since troughing at just under R16 in March last year, the Pick n Pay share price has bounced back to about R28. But it’s only really its Boxer investment and clothing that’s maintaining investor interest. Assuming breakeven is achieved in financial 2028, the performance is hardly likely to be especially exciting. And we still need to have clarity on a succession plan for Summers.
• Gilmour is an investment analyst.
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