Pick n Pay has announced a major restructuring of its operations to boost trade and reduce debt

BUSINESS

The Ackerman family has confirmed they will follow their rights and forego majority shareholder voting control of Pick n Pay. Gareth Ackerman, after 40 years of service, including 14 as chairperson, will retire from his role as chair of the board of directors after the release of the 2025 results (next year).

The new CEO of South Africa’s third biggest grocery retailer Pick n Pay announced on Monday that more than 100 loss-making core supermarket stores will be either closed or converted, in a group-wide revamp.

Here are the main details:

REASONS FOR THE STRATEGIC REVIEW

Once the country’s top retailer, Pick n Pay has been losing market share to Shoprite and other rivals for more than a decade.

In the years of sluggish economic growth that followed the global financial crisis, the group struggled to balance the need to protect margins with aggressive discounts needed to woo bargain-hunting consumers.

Founded by the late Raymond Ackerman in 1967, Pick n Pay had opted to pay higher dividends, meaning it was not investing enough to grow its business and keep up with its competitors.

In contrast, Shoprite aggressively pushed into the mass market, while repositioning its Checkers chain for the affluent shopper. The group has also spent heavily on technology and broadening product ranges, while investing in on-demand grocery delivery and centralised distribution, something Pick n Pay only did later.

Outgoing chair Gareth Ackerman told investors on Monday that “inappropriate strategic initiatives” over the last decade had failed to prevent profit declines in the core Pick n Pay supermarkets business.

One of them was the conversion of some Pick n Pay stores into Qualisave brand stores, focused on the low- to middle-income market, which has not generated the expected results.

PICK N PAY CORE REVIVAL PLAN

More than 100 loss-making Pick n Pay supermarket stores will be closed or converted to Pick n Pay franchise or discount Boxer stores, resulting in about R850 million in savings.

The retailer will convert the new Qualisave branded stores back to Pick n Pay stores, with expected R50 million in conversion costs.

The company said it would also reverse certain previously implemented range decisions that hurt its performance, but did not provide further details. It said it would also strengthen regional buying teams to secure more competitive prices and expand fresh food product ranges and private label products. The remaining stores will be modernised.

Pick n Pay has 1 423 company-owned stores, of which 345 are core Pick n Pay hyper- and supermarket stores.

TARGETED COST SAVINGS

Pick n Pay is targeting about R1.3 billion in savings through cost cuts over the next three years, as it streamlines its operating model by minimising waste and simplifying processes.

RAISING CAPITAL FOR INVESTMENTS AND DEBT REDUCTION

CEO Sean Summers announced a two-step recapitalisation plan earlier this year, which includes a rights issue to raise up to R4 billion and Boxer’s listing.

Chief financial officer Lerena Olivier told investors that the retailer needed about R10 billion to R12 billion in capital, with R6 billion to R8 billion projected to come from the Boxer listing. It will also reduce grocery inventory to release cash tied up in working capital.

TIMELINE

The initiatives will be implemented in a phased approach until financial year 2027, when Pick n Pay core business is expected to break even.