Pick n Pay CEO’s six months from hell

 ·31 May 2024

Pick n Pay chief executive Sean Summers’ said no company in South Africa’s history had to jump as many hurdles as they did in 2024.

Summers took over as Pick n Pay CEO from former Pieter Boone last year and inherited a company facing severe challenges.

Pick n Pay chairman Gareth Ackerman said the company’s Pick n Pay business has performed poorly and has not met expectations.

Under Boone, the company embarked on its failed Ekuseni strategy, which included converting liabilities into long-term debt.

The company also raised capital to support the four-year Ekuseni strategy, putting further financial pressure on the company.

It soon became evident that the strategy was not working, and the Pick n Pay board booted Boone and parachuted Summers in to fix the mess.

The retailer’s latest annual financial results showed the extent of the damage the failed strategy caused.

Pick n Pay’s net profit decreased by 373%, and its balance sheet was a disaster. For the first time, Pick n Pay has become technically insolvent.

Its debt burden caused Pick n Pay to breach all its debt covenants. It had to pledge 100% of Boxer’s shareholding as additional security for lenders to agree to relax its debt covenants.

Pick n Pay needed saving, and the Ackerman family, which controls Pick n Pay, felt Summers was the man for the job.

Summers is a Pick n Pay stalwart who worked for the company from 1974 to 2007. He became managing director in 1996 and CEO in 1999.

During his tenure as chief executive, Summers made Pick n Pay the clear grocery market leader in South Africa.

Under Summers, Pick n Pay achieved an average revenue growth rate of 16% per annum, much higher than the 11% Shoprite achieved over the same period.

Pick n Pay also overtook Shoprite as the food retailer which generated the most revenue from 2003 to 2007.

It was easy to see why the Ackerman family asked Summers to help to turn the company around.

Pick n Pay chairman Gareth Ackerman

After Summers’ return, Pick n Pay embarked on a turnaround strategy, which included bringing back former executives, closing struggling stores, and rolling back its Qualisave store strategy.

Although the strategy looks easy on paper, Summers said it is incredibly challenging with many moving parts.

“There has never been a company in South Africa’s history which had to jump as many hurdles as us this year,” he said.

Pick n Pay had a highly complex lending group, with eleven banks wanting their pound of flesh, which had to be dealt with.

“Dealing with the eleven-bank lending group had complexities in and of itself,” Summer told Classic Business.

On the back of dealing with the banks, Pick n Pay had to prepare for a rights offer through which it plans to raise R4 billion.

The company is also planning to list its subsidiary Boxer. It hopes to raise between R6 billion and R8 billion from the Boxer IPO.

The goal of the dual-capital-raise strategy is to solve the short-term debt problem, get more working capital, and reduce long-term debt.

Following the rights offer and the Boxer listing, Pick n Pay should have raised enough money to address “square off its debt and be done with the lender group”.

All of this happened while Summers and his team were preparing a business plan to improve Pick n Pay’s fortunes.

“We have had many issues to deal with. We crossed these hurdles one at a time,” the 70-year-old Summers said. “It has certainly been an interesting six months if one can put it mildly.”

He credited the endurance, loyalty, and courage of Pick n Pay employees for what they have achieved so far.

“Ordinary people achieving the extraordinary is our mantra at the end of the day,” Summers said.

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