Casparus Treurnicht, research analyst and portfolio manager at Gryphon Asset Management, said he had expected stronger improvement in Pick n Pay’s trading margins and more visible progress in stores at this stage of the turnaround.
Image: Facebook/PicknPay
Pick n Pay says its turnaround strategy remains on course, but CEO Sean Summers has warned the recovery process could take longer than initially expected.
According to Business Report, the retailer, South Africa’s second-largest grocery chain, launched its recovery plan in late 2023 to restore profitability, simplify operations and revive its core supermarket business.
Speaking on Monday, Summers said management had initially hoped the turnaround would take about three years, but acknowledged the process may now extend beyond that timeframe despite steady progress.
Pick n Pay 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 we have taken and the investments we made,” Summers said.
He said the group now had the balance sheet strength needed to support a return to profitability, but added that achieving break-even would depend on successfully implementing all six strategic priorities, including reducing labour costs.
Earlier this month, the retailer announced a Section 189A consultation process involving store employees. This followed major restructuring of its back-office operations over the past two years, which included salary freezes and job losses, Business Report reported.
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.
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.
Summers said about 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%, while the group’s online business grew turnover by 32.7%.
Group trading profit fell 4.2% to R1.7 billion. Boxer increased trading profit by R330 million, while Pick n Pay’s trading loss widened by R404 million to R1 billion as the supermarket repositioning continued.
Summers said improvements had been made in store standards, product availability and fresh produce ranges, alongside progress in supply chain efficiencies and logistics.
Casparus Treurnicht, research analyst and portfolio manager at Gryphon Asset Management, said he had expected stronger improvement in Pick n Pay’s trading margins and more visible progress in stores at this stage of the turnaround.
He added that Shoprite continued to gain market share at the expense of Pick n Pay and SPAR.
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