Pick n Pay, South Africa’s second-largest grocery chain, has warned that its turnaround strategy may take longer than initially expected. CEO Sean Summers acknowledged that the recovery process, initially hoped to take about three years, may extend beyond that timeframe despite steady progress.
According to Summers, the retailer reduced its operating loss by 5.4% to R386 million for the 52 weeks ended March 1. While Pick n Pay’s trading loss increased, the business is fundamentally stronger than two-and-a-half years ago as a result of the action taken and the investments made, Summers said.
Pick n Pay’s Turnaround Priorities
The group has identified six strategic priorities to achieve a return to profitability, including reducing labour costs. Earlier this month, the retailer announced a Section 189A consultation process involving store employees, which followed major restructuring of its back-office operations over the past two years, including salary freezes and job losses, as reported by the South African Statistics Agency.
Summers said Pick n Pay employees currently receive double pay for Sunday work, compared with the industry norm of 50% extra pay. He added that discussions with labour representatives had already been underway for two-and-a-half years. The Commission is facilitating the consultation process for Conciliation, Mediation and Arbitration.
Operational Improvements
Despite the challenges, Summers said the group had seen operational improvements across its core supermarket business, while discount retailer Boxer continued to deliver strong growth. Three of Pick n Pay’s six turnaround priorities have largely been completed, including recapitalising the business, rebuilding leadership structures and resetting the store estate.
Last week, the group raised R4.7 billion through the sale of an 11.5% stake in Boxer, leaving Pick n Pay with a 54% shareholding in the discount chain. Group turnover increased by 3.4% over the reporting period. Boxer turnover grew 12.3%, while Pick n Pay turnover declined 1.6% due to store closures and conversions.
- 90 stores were removed from the group’s turnover figures after being converted to Boxer outlets, sold to franchisees or shut down entirely.
- Pick n Pay supermarkets recorded like-for-like sales growth of 3.9%.
- The group’s online business grew turnover by 32.7%.
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