{"id":791536,"date":"2024-09-18T08:16:36","date_gmt":"2024-09-18T06:16:36","guid":{"rendered":"https:\/\/businesstech.co.za\/news\/?p=791536"},"modified":"2024-09-18T08:16:41","modified_gmt":"2024-09-18T06:16:41","slug":"pick-n-pay-warning-amidst-store-closures","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/business\/791536\/pick-n-pay-warning-amidst-store-closures\/","title":{"rendered":"Pick n Pay warning amidst store closures"},"content":{"rendered":"\n

Many analysts have warned to approach Pick n Pay with caution as the company is closing stores and losing market share to its competitors.<\/p>\n\n\n\n

Pick n Pay\u2019s latest trading statement revealed that sales only grew 0.1%, and it expects earnings per share to decrease by more than 20%.<\/p>\n\n\n\n

In comparison, Shoprite \u2013 which owns brands like Checkers and Usave \u2013 showed a strong performance. Revenue was up 12.1% and trading profit grew by 11.7% to R13.40 billion.<\/p>\n\n\n\n

Even more telling was that Pick n Pay closed 16 supermarkets, including four corporate stores and 12 franchise stores, in the first 21 weeks of the financial year.<\/p>\n\n\n\n

Shoprite has taken over many Pick n Pay stores. It had opened eight new supermarkets at sites previously occupied by Pick n Pay on the East Rand.<\/p>\n\n\n\n

One of these supermarkets is a Shoprite store, while the remaining seven are branded as Checkers stores.<\/p>\n\n\n\n

Redefine Properties, which owns many of South Africa\u2019s top shopping malls, also recently announced that it is taking back 10,000 square meters from Pick n Pay.<\/p>\n\n\n\n

The company owns many of South Africa\u2019s largest shopping malls, including Centurion Mall, Blue Route Mall, Cradlestone Mall, and East Rand Mall.<\/p>\n\n\n\n

Its portfolio includes Benmore Centre, Centurion Lifestyle Centre, Kyalami Corner, Goldfields Mall, Golden Walk, Kenilworth Centre, and Horizon Shopping Centre.<\/p>\n\n\n\n

In a recent Capital Markets Day presentation, it said the 10,000 square meters it is taking back from Pick n Pay will optimise space in its shopping malls and increase trading density.<\/p>\n\n\n\n

Pick n Pay has been a drag on many shopping malls where it is the anchor tenant as it does not drive as much foot traffic as Checkers.<\/p>\n\n\n\n

By taking back space from Pick n Pay, shopping malls will likely increase the rent they receive for the space. It will also add value to shoppers.<\/p>\n\n\n\n

This does not bode well for the retailer, which has been struggling to grow revenue and compete against Shoprite, Spar, and Woolworths.<\/p>\n\n\n\n

It was in such big trouble that it had to embark on a two-pronged capital raise to strengthen its balance sheet and reverse its technical insolvency status.<\/p>\n\n\n\n

Despite the company\u2019s current situation, Pick n Pay CEO Sean Summers is optimistic that there is still space in the market for Pick n Pay.<\/p>\n\n\n\n

\u201cI think if we apply our minds correctly, we can come back and carve back its place in the marketplace,\u201d he said.<\/p>\n\n\n\n

\"\"<\/a>
Pick n Pay CEO Sean Summers<\/figcaption><\/figure>\n\n\n\n

What investment analysts say<\/strong><\/h2>\n\n\n\n

In 2024, Pick n Pay\u2019s share price increased by 22%, raising the question of whether it is a turnaround store with great upside for investors.<\/p>\n\n\n\n

Many analysts warned that while Summers is the right man for the job, it is very difficult to fix Pick n Pay and return it to its former glory.<\/p>\n\n\n\n

Rowan Williams from Nitrogen Fund Managers said the core Pick n Pay business is badly broken and will take a long time to fix.<\/p>\n\n\n\n

\u201cIt will take two to three years to fix, and they will have to trim the store base considerably. This is not an exciting story. They are just stopping the bleeding,\u201d he said.<\/p>\n\n\n\n

He added that Shoprite, which is the dominant force in the market, is using the savings from the load-shedding reprieve to reduce margins.<\/p>\n\n\n\n

\u201cIt is a very competitive space, and Shoprite is squeezing Pick n Pay when they are down. They will continue to do so,\u201d he said.<\/p>\n\n\n\n

Devin Shutte from The Robert Group said Pick n Pay has underinvested in their business for many years and is now playing catchup with Checkers.<\/p>\n\n\n\n

They have fallen behind Checkers and Shoprite regarding store formats, the look and feel of their supermarkets, and their distribution.<\/p>\n\n\n\n

Grant Nader from Benguela Global Fund Managers highlighted that Shoprite Checkers and Spar continue to improve their offerings.<\/p>\n\n\n\n

Shoprite is aggressively rolling out new stores, and Spar is refocusing its efforts on South Africa, which is increasing competition in the food retail market.<\/p>\n\n\n\n

Another challenge is that scale provides retailers with a competitive advantage. The bigger you are, the bigger your advantage.<\/p>\n\n\n\n

While Shoprite is growing and increasing its scale, Pick n Pay is closing stores and reducing its scale. Shoprite is a clear winner.<\/p>\n\n\n\n

They explained that it is not certain that Pick n Pay can flourish again. \u201cEven with the multiple recapitalisations, the execution risk is high,\u201d Shutte said.<\/p>\n\n\n\n

This means that investing in Pick n Pay at current levels carries significant risk and does not guarantee growth.<\/p>\n\n\n\n

Most analysts agreed that it is better to buy the strong player, Shoprite than to invest in the weak player, Pick n Pay.<\/p>\n\n\n\n

\n\n\n\n

Read: From a 1930s dining hall to one of the biggest household names in South Africa<\/a><\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"

Many analysts have warned to approach Pick n Pay with caution as the company is closing stores and losing market share to its competitors.<\/p>\n","protected":false},"author":10,"featured_media":791539,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[9872],"tags":[5223,4067,13688,19960,7520],"class_list":["post-791536","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-business","tag-checkers","tag-pick-n-pay","tag-redefine-properties","tag-sean-summers","tag-shoprite"],"_links":{"self":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/791536","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/users\/10"}],"replies":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/comments?post=791536"}],"version-history":[{"count":2,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/791536\/revisions"}],"predecessor-version":[{"id":791551,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/791536\/revisions\/791551"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media\/791539"}],"wp:attachment":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media?parent=791536"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/categories?post=791536"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/tags?post=791536"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}