Pick n Pay delivers early momentum on its turnaround plan

The retailer puts the worst behind it

The Pick n Pay Group’s turnaround strategy is gaining traction with encouraging progress made across a number of key strategic and operational initiatives, including another formidable performance from its Boxer business and an underlying improvement in the performance of Pick n Pay supermarkets. These were key reflections in the Group’s interim results, published today, which also reported strong sales growth in Pick n Pay Clothing and Pick n Pay Online.

As anticipated, the first six months of FY25 (26 weeks ended 25 August 2024) remained challenging. However, due to improved store operations - showing a distinct turnaround - Pick n Pay CEO Sean Summers says they are quietly confident that they will reduce trading losses in the Pick n Pay segment by as much as 50% for the full- year.

Group turnover grew 3.7% to R56.1 billion, with like-for-like sales growth of 2.9%, with performance varying across divisions. Boxer recorded strong sales growth of 12.0%, well balanced between like-for-like sales (+7.7%) and sales from new stores (+4.3%). Boxer recorded another impressive earnings performance, with trading profit up 16% year-on-year. “The Boxer IPO remains pivotal to our strategy, and their remarkable performance continues to prove it is an exceptional business. We are excited to see it thrive as a listed entity,” said Summers. “It will be one of the most exciting listings on the JSE in years.”

Company-owned Pick n Pay supermarkets saw an encouraging performance for the first half of FY25, with like- for-like sales growth increasing to 3.1%, moving out of the negative territory recorded in the second half of FY24, which was -0.5%.

This improvement reflects early signs of recovery, driven by more competitive pricing and enhanced product ranges for customers, including reinstating over 3,000 products and extending Pick n Pay’s private label offer. Customers benefited from lower prices through the Group’s investing reduced loadshedding costs into lower prices for essential items, and keeping internal inflation at 3.4%, below market averages.

The Group also prioritised customer service by training 35,000 staff members through a new ‘hearts and minds’ programme, and this process is ongoing to improve service levels more in line with customer expectations.

Pick n Pay Clothing continued to accelerate and gain market share, with 9.8% sales growth and an additional ten new stores in the half. Online sales also saw impressive growth (+60.6%), driven by ongoing enhancements to the Pick n Pay asap! app, faster picking and delivery times and an expanded footprint to 550 locations.

The Pick n Pay store reset process, a key priority in the plan, is well underway. This will address loss-making Pick n Pay stores, which disproportionately affected the Group’s performance in the first half. Fourteen underperforming stores were closed during the period, and we completed our first successful conversion to Boxer. “We are steadily progressing to a better performing and more profitable store estate by closing loss- making stores, converting stores to franchise, or to Boxer. Our estate is starting to make a great deal more sense.”

“Through greater store discipline and execution, some of the stores initially identified for closure have since become profitable. And that isn’t the only change to our estate; we will also open several new Supermarkets before the end of the calendar year,” says Summers.

While much work still needs to be done to return the Group to profitability within the three-year timeframe provided for in the turnaround, Summers said that early indications are positive and that the Group was on the right trajectory.

The Group has delivered on key milestones across its turnaround plan in a short period. This includes the

successful conclusion of the 106% over-subscribed Rights Offer as part of the Group’s two-step Recapitalisation Plan, which raised R4.0 billion in new capital. In addition, the Boxer IPO will further strengthen the Group’s balance sheet, and remains on track for completion at the end of 2024.

Looking ahead, Summers said the Group was confident in stronger second-half earnings, driven by reduced net funding costs from the Recapitalisation Plan, continued growth in Boxer and Clothing, further early recovery in Pick n Pay, and the imminent Boxer IPO, in which Pick n Pay will retain a controlling stake.

Summers concludes:

“The team is completely committed to our plan and priorities to ensure these positive changes fully reflect in our earnings.

“Our focus this year has been strengthening our balance sheet, as well as implementing the turnaround plan. Once our capital is in place, we can also start investing in refurbishing Pick n Pay stores and opening new ones.

“Exactly a year ago, when I re-joined Picked Pick n Pay, I forecast that this would be a multi-year journey and that it would get worse before getting better. Our earnings for the first half reflect this, and I am confident that the worst is behind us now.

“I’d like to pay tribute to the entire Pick n Pay team, who has done a magnificent job with huge energy and focus against all odds.

“On Wednesday, we will also announce a strategic partnership that will be a game changer for our business and customers alike, showing further confidence and traction in our journey to restoring Pick n Pay to its rightful place.”

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