Pick n Pay’s Summers has tough road ahead to right loss-making retailer

Pick n Pay’s CEO Sean Summers says his focus is to return the core supermarket business to growth and profitability, and maintain the growth of other key parts of the business. Picture: Supplied

Pick n Pay’s CEO Sean Summers says his focus is to return the core supermarket business to growth and profitability, and maintain the growth of other key parts of the business. Picture: Supplied

Published Oct 19, 2023


Pick n Pay’s share price dropped by nearly 15% following it reporting an interim loss, which its new CEO Sean Summers labelled as “disappointing” due to elevated load-shedding costs and an increased competitive intensity.

The shares fell to an intraday low of R25.27 and have trended 49.37% lower in the past year.

In its trading profit for the 26-week period, the retailer reported a 97.5% loss, which was R31.8 million compared with R1.3 billion in the comparable 2022 period.

The retailer spent just under R400m on diesel, which added to expense growth, and limited its ability to respond to strong competitor promotional activity.

The group reported a headline loss per share of 129.20 cents, which decreased from the 88.76c reported last year.

“Owing to the pro forma loss declared for the period, the board has not declared an interim dividend,” it said.

Group turnover grew 5.4% (2.3% like-for-like) to R54.1bn, boosted by a strong performance in Boxer stores, which reported 16.1% growth.

Profit before tax was further impacted by a 47.3% increase in net finance charges. This resulted in a pro forma loss before tax and capital items of R837.2m.

The group appointed its former CEO Sean Summers, who led it from 1999 to 2007, to replace Pieter Boone, who was at the helm for two and a half years.

Speaking to “Business Report”, Summers said: “I suppose to a degree, I am very disappointed that we’ve had to report this performance, but it is what it is.

“I mean, I certainly didn’t arrive here expecting anything materially different from what we’ve announced today. So to say that forewarned is forearmed. I was certainly forewarned before I stepped into the breach. That hasn’t been a surprise, shocking as it is.”

Summers said his focus was to return the core supermarket business to growth and profitability, and maintain the growth of other key parts of the business.

“It really is just getting back to the good, old, basic, fundamental realities of retail. It’s about getting the right product in the right store at the right time with the right people in the right environment. That is where we fall behind the curve.

“I’ve had such extraordinary positive feedback from everybody. But the underlying message has been that South Africa wants its Pick n Pay back, customers want their Pick n Pay back because they feel that somehow the company has lost its way, and that’s why we’ve declared a loss, because it has lost its way. We’re going to put it back on track. We’re going to reinstate the fundamental tenets of retail that we always had in place, and we will cease to disappoint our very, very loyal customers,” he said.

The group reported that Boxer delivered growth of 16.1%, taking the number of stores to 454.

“Boxer remains on track to achieve the goal of opening 200 new stores between the 2022 and 2026 financial year and doubling sales. Pick n Pay Clothing performed very well, growing sales 13.8% from stand-alone stores, with 20 new company-owned stores. This division continues to grow market share across all market segments and is on track to open 60 new stores for the year,” the group said.

Pick n Pay reported that online sales grew by 76.3%, driven by the group’s on-demand platforms Pick n Pay asap!, and Takealot’s Mr D.

“The refreshed asap! app was relaunched in October. On-demand sales doubled year on year,” it said.

The rest of the African segment contributed R2.7bn in sales, up 14.4% year on year, and 12.2% in constant currency, it said.

“Pick n Pay acquired Tomis, a state-of-the-art abattoir and meat-packaging business, which will allow the group to significantly improve the quality of its fresh meat offer,” Pick n Pay said.

Looking ahead, the group said it expected to face continued headwinds in the latter half of the year but anticipated the second half of the 2024 financial year earnings outlook to be stronger than the first half of the 2024 financial year, driven by more supportive earnings seasonality, net incremental energy cost growth to be relatively low and non-repeat of supply chain cost duplication.

Umthombo Wealth assistant portfolio manager and equity analyst Nomtha Ngumbela said Pick n Pay released a tough set of interim results, which included their first interim loss on record and no dividend declared.

“It was difficult not to note other concerning metrics, such as the drop in gross margins, higher trading costs as well as higher levels of debt resulting in a pickup in finance costs of 47.3%. From an earnings outlook perspective, Summers cautioned that no miracles were expected and that the road to recovery would be a marathon, not a sprint,” she said.

Ngumbela said there was no denying that Summers was passionate about the business and returning it to its former glory.

“He starts this journey at a time when Pick n Pay’s share price is nearing levels last seen when he exited the group! I was encouraged by the emphasis on mending the culture within the company as well as the group’s relationship with its suppliers. The key will be his ability to execute on his strategy,” she said.