During its Capital Markets Day presentation, Redefine Properties said that taking back space from Pick n Pay will optimise space in its shopping malls.<\/p>\n\n\n\n
Analysts have highlighted that 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 and add value to shoppers.<\/p>\n\n\n\n
Even CEO Sean Summers admitted that South Africans have stopped supporting the retailer and that Pick n Pay has fallen out of love with retail.<\/p>\n\n\n\n
Summers believes that<\/a><\/strong>, despite the company\u2019s downward trend over recent years, \u201cPeople out there in South Africa want their Pick n Pay back\u201d.<\/p>\n\n\n\n He is on a drive to put his passion for retail back into Pick n Pay. \u201cEvery associate in the business should feel that same love and sense of belonging,\u201d he said.<\/p>\n\n\n\n To stop the decline, Summers launched a six-point strategy<\/a><\/strong> to restore the Pick n Pay supermarket business to profitability.<\/p>\n\n\n\n The back-to-basics strategy has six priorities and will focus on simplicity, quality, affordability and sustainability to help the iconic brand reclaim its former glory.<\/p>\n\n\n\n The six strategic priorities include leadership and people, resetting the store estate, and improving offers to drive sales.<\/p>\n\n\n\n It will further focus on optimising the operating model, recapitalisation, and leveraging the strength of partnerships.<\/p>\n\n\n\n \u201cThis is a three-year turnaround programme. We will work with vigour, energy and passion to get it right,\u201d Summers said.<\/p>\n\n\n\n \u201cWe have a strong operational leadership team to help us set the business on a path of long-term sustainability.\u201d<\/p>\n\n\n\n Most analysts agree that Summers is the right man for the job. He was in charge during the 2000s when Pick n Pay achieved exceptional growth and outperformed its rivals.<\/p>\n\n\n\n However, turning the retailer around is easier said than done. It faces stiff competition from Checkers, Woolworths Food, and Spar.<\/p>\n\n\n\n Many analysts have warned that investors should be cautious before investing in Pick n Pay as it will struggle to gain market share.<\/p>\n\n\n\n Devin Shutte, head of investments at The Robert Group, highlighted that Pick n Pay has underinvested in their business for years.<\/p>\n\n\n\n This underinvestment has caused Pick n Pay to fall behind Checkers and Woolworths Food. Its store formats and look and feel are outdated.<\/p>\n\n\n\n This means that many South Africans have changed their shopping habits and moved to other retailers like Checkers.<\/p>\n\n\n\n It will be difficult for Pick n Pay to catch up to its competitors and lure these shoppers back. Shutte said it is not certain that Pick n Pay will flourish again and return to its glory days.<\/p>\n\n\n\n \u201cEven with the multiple recapitalisations, including the rights offer and Boxer listing, the execution risk is high,\u201d Shutte said.<\/p>\n\n\n\n Even though Pick n Pay is starting to improve, its competitors like Shoprite Checkers, Woolworths Food, and Spar are also improving their offerings.<\/p>\n\n\n\n Benguela Global Fund Managers portfolio manager Grant Nader highlighted that Checkers is aggressively rolling out new stores, and Spar is refocusing its efforts on South Africa.<\/p>\n\n\n\n \u201cIt is competitive on all fronts. This is a scale game where price and margin are important. The retailer with the biggest scale has the biggest advantage,\u201d Nader said.<\/p>\n\n\n\n Compared with Shoprite, which is growing, Pick n Pay is shrinking, which puts it on the back foot. \u201cThey have less margin to play with. They are in a tough position,\u201d he said.<\/p>\n\n\n\n Cobus Potgieter from Southern Cross Capital was even more sceptical, saying he does not feel the Pick n Pay restructuring plan is credible.<\/p>\n\n\n\n He previously said the rights issue and planned Boxer unbundling and IPO would not unlock the value shareholders seek and put Pick n Pay on a path to profitability.<\/p>\n\n\n\n \u201cPick n Pay\u2019s competitors are not sitting still, and we have seen that Shoprite is eating their lunch,\u201d Potgieter said.<\/p>\n\n\n\nWarning from analysts<\/strong><\/h2>\n\n\n\n
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