Pick n Pay continues closing stores in South Africa as separation looms

Pick n Pay continued closing down corporate and franchise stores across South Africa as part of its turnaround and ahead of its separate listing of Boxer.

On Thursday, Pick n Pay, which owns Pick n Pay Grocery Stores and Boxer, published a trading statement with an update on the 26 weeks ending 25 August 2024.

Pick n Pay’s trading statement was released after the markets closed, which indicates that it is not good news.

The retailer revealed that investors should expect another poor performance when it releases its results for the first half of its 2025 financial year on Monday, 28 October 2024.

Pick n Pay warned that its loss per share and diluted loss per share will increase between 30% and 40% year-on-year.

Its headline loss per share and diluted headline loss per share will increase between 10% and 20% year-on-year.

Its comparable headline loss per share and diluted comparable headline loss per share will increase by between 20% and 30%.

This poor performance was due to its struggling Pick n Pay business. Boxer, in comparison, performed well.

Boxer sales grew 12.0%, driven by strong like-for-like sales and complemented by new store openings.

Boxer opened twelve net new stores during the period and anticipates a ramp-up in new store openings in the second half of the year.

In comparison, Pick n Pay sales declined by 0.3%, with Pick n Pay South Africa sales increasing by 0.1%. Like-for-like sales in South Africa were slightly higher at 1.1%.

Pick n Pay sales growth lagged like-for-like sales because it closed 24 supermarkets, including 10 corporate stores and 14 franchise stores, during the period.

These store closures formed part of Pick n Pay’s turnaround strategy, which included shutting down loss-making supermarkets.

Pick n Pay CEO Sean Summers previously said the company would close 35 underperforming Pick n Pay stores and convert 70 outlets to the Boxer brand.

He added that they had identified many stores in critical condition and would not make the same mistake as in the past to convert these struggling stores into franchises.

“You merely end up with an extraordinary franchise debt and franchisees under too much pressure,” he explained.

Pick n Pay turnaround plan

Pick n Pay remained upbeat about its prospects despite the poor trading statement and bigger losses.

It told investors that the Pick n Pay segment’s refreshed management team began to execute the turnaround plan.

The retailer said the group is well advanced in executing its two-step recapitalisation plan. It includes:

• The successful completion of its R4 billion rights offer in August 2024.

• Receiving overwhelming shareholder support at its 1 October 2024 general meeting to proceed with the listing of Boxer on the main board of the JSE towards the end of the year.

The company added that it made good progress on its Pick n Pay turnaround in South Africa, which it measures through like-for-like sales.

“The Group is seeing steady improvement in this metric, from -0.4% in H2 FY24 to +1.3% for the period,” it said.

It explained that company-owned Pick n Pay supermarkets, which account for most reported sales, have underperformed in recent years.

“As a result of improved retail operations, like-for-like sales growth for this segment increased from -0.5% to 3.1%,” Pick n Pay said.

In comparison, like-for-like sales growth in franchise supermarkets declined by 1.4%, which it said was disappointing.

“Over recent years, company-owned Supermarkets have rarely outperformed franchise stores,” Pick n Pay said.

The retailer said this reversal confirms the early progress in the turnaround of company-owned supermarkets.

Pick n Pay said it is now focussed on revitalising the performance of franchise stores to improve its South African performance.

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