Pick n Pay, one of South Africa's prominent retailers, is implementing significant changes to reverse years of declining performance and regain market share. Under the leadership of CEO Sean Summers, who returned to the helm in October 2023 at the request of the Ackerman family, the company is undergoing what it deems a necessary turnaround strategy to address several challenges.
The trading update for the 45 weeks ending January 5, 2025, revealed some encouraging headlines. Group sales increased by 3.6%, with Pick n Pay reporting steady like-for-like sales improvements. Its smaller, agile counterpart, Boxer, stood out with impressive gains—sales surged by 11.4% during the same period. The stock market responded favorably, with Pick n Pay's shares climbing 4.82% to R29.33, and Boxer also enjoying growth as it adjusted to its new identity following its spin-off as a separate listed entity on the JSE.
Despite these signs of life, challenges loom. Pick n Pay's performance needs to be contextualized against its tough competitive environment, particularly from rivals like Shoprite. Nadine Chetty-Khan, an investment analyst at Private Clients by Old Mutual Wealth, pointed out, "Store closures, made necessary by subpar performance, don’t address the underlying issues threatening Pick n Pay's position."
To make the brand more competitive, the retailer's plan includes extensive store closures and conversions. During this financial period alone, 32 stores were shut down—24 from company-owned outlets and eight franchises. Five stores transitioned from company-owned to franchise operations as part of the restructuring process. Sean Summers has indicated this reshaping is intended to curtail losses from underperforming locations. Nonetheless, this contraction naturally led to short-term declines, with overall sales down 0.1% as closures took effect.
Pick n Pay is rolling out its 'Store Estate Reset' initiative, which aims at refining its footprint to optimize profitability. The plan anticipates shutting down roughly one out of ten corporate supermarkets, focusing instead on enhancing the overall customer experience within the remaining stores. It targets to piece together greater operational efficiencies by potentially converting up to 100 supermarkets to franchises or Boxer outlets.
Summers emphasizes the importance of staff well-being and customer engagement as catalysts for this long-term recovery. He noted, "We are far, far from done," showcasing not just determination, but the acknowledgment of significant work still required going forward. The approach emphasizes building trust through transparency and performance metrics—something the business had strayed from. Annual reports to shareholders have committed to outlining specific performance conditions linked to Summers' share incentives, underscoring accountability at the executive level.
At the same time, Pick n Pay is capitalizing on the surge of e-commerce. Online sales leaped by 42.5%, largely attributed to gains from the Pick n Pay asap! service and grocery offerings through the Mr D app. This segment contrasts sharply with the physical retail struggles, projecting the need for mixed models integrating both store and online offerings.
The retail customer experience is also under scrutiny as the company strategizes ways to mend frayed connections with consumers. The intent is to rejuvenate the company’s staffing strategies and alter employee attitudes toward customer engagement. Summers describes these improvements as imperative and believes tangible results could manifest sooner than anticipated.
Moving forward, the focus remains on maintaining sales growth and ensuring consistent improvements. Analysts foresee potential for the brand’s revival, provided management tackles the core issues diligently. According to company updates, from March to August, sales began showing signs of improvement, rising by 3.1%. The most recent weeks have shown even sharper rebounds, accelerating to a growth of 4.1%.
By reinstilling faith with hands-on improvements and resolutions to rectify previous shortcomings, Pick n Pay aims to set the foundation for sustainable growth and return to profitability. The anticipated release of the full-year results at the end of May 2025 will potentially reveal more insights about the effectiveness of these initiatives.
Through all of these efforts, Summers has received substantial performance-based share incentives—four million shares, valued at over R110 million if the company can meet its strategic goals. This drive for performance links personal stakes of leadership to tangible outcomes for investors, capturing the essence of benefit-at-risk associated with corporate turnaround strategies.
With the ambition underpinning the turnaround strategy, the coming months will be pivotal for Pick n Pay as it endeavors to emerge from the shadows of past performance issues, rekindling investor confidence and striving to serve its customers effectively.