Pick n Pay warning

Wayne McCurrie from FNB Wealth and Investments warned that Pick n Pay has a tremendous uphill battle to fix the company and compete against Shoprite.

This week, Pick n Pay launched its rights offer to raise R4 billion. The money will be used to address its debt burden and strengthen its balance sheet.

51.11 rights will be issued at R15.86 per share for every 100 Pick n Pay shares held, representing a 32.5% discount to the ex-rights share price.

Absa, Rand Merchant Bank and Standard Bank fully underwrite the rights offer, which bodes well for the retailer.

Pick n Pay also plans to list Boxer separately on the JSE in 2024 in an initial public offering (IPO) to raise R6 billion and R8 billion.

Another intervention is that 112 Pick n Pay stores will either be closed or converted to Boxer franchised stores.

This three-pronged approach to turn the struggling retailer around sounds promising. However, the hard work is only starting.

“There is a major uphill battle ahead for Pick n Pay CEO Sean Summers and his team,” McCurrie said.

He said launching a rights issue, restructuring the balance sheet, and closing underperforming stores is the easy part.

“The hard part is how you become competitive again. Simply put, how do you take on Shoprite? That is a monumental task,” McCurrie said.

He said despite Pick n Pay’s strong share price performance in recent months, he is not bullish on the retailers.

McCurrie also had advice for existing shareholders. “If you don’t want to put more money into Pick n Pay, sell your rights. Don’t just let them expire,” he said.

“If I was a Pick n Pay shareholder, I would sell my NPLs (nil paid letters) and the shares I still own.”

David Shapiro from Sasfin Securities echoed McCurrie’s views, saying they run two businesses – Pick n Pay and Boxer.

Boxer, the best-performing business, will be listed to raise additional money to strengthen its balance sheet.

This means that Pick n Pay shareholders will not get the full benefit of Boxer after its initial public offering (IPO).

“They have to get Pick n Pay to where it was. They caught the big snake – they have to claw their way up those ladders again,” he said.

“It will take a long time and a lot of effort. They will have to get customer support again. They have lost customer support.”

Shapiro added that Pick n Pay is closing one store after another. “There are going to be huge disruptions,” he said.

He added that while he greatly respects Sean Summers, he has a tremendous amount of work to do to fix Pick n Pay.

“Why invest in the lower. Invest in the winner, which is Shoprite. If you want to buy a grocery retailer, pick Shoprite.”

Seam Summers’ plan for Pick n Pay

Summers is confident in his ability to turn the retailer around. However, he warned investors to “strap in and hold on”.

“I never, ever make promises that I can’t keep, and I’ve always believed that the most important thing in life is the truth,” he said.

“What I’ve tried to do is tell the truth to the market – this is our situation, our bedrock. Things will get busier from here, and we will come out on the other side.”

Summers’ turnaround plan is based on his belief that the world of retail has not changed significantly since his departure fifteen years ago.

He said Pick n Pay fell behind because it stopped giving customers what they wanted and obsessing about customer satisfaction.

“For 10, 12 years, the company took their eye off the ball,” he said. He told Daily Investor that Pick n Pay’s big problem is falling out of love with retail.

“I think if we apply our minds correctly, we can come back and carve back its place in the marketplace,” he said.

“It’s about putting that passion back into the business, and that passion has to be shared by everybody. Every associate in the business should feel that same love and sense of belonging.”

Summers believes that, despite the company’s downward trend over recent years, South Africans want their Pick n Pay back.

“We took it away from them. They didn’t take it away from us, and they want it back.” This is why Summers is implementing a “Back to Basics” strategy to get Pick n Pay back on track.

This plan has six priorities and will focus on simplicity, quality, affordability and sustainability to help the iconic brand reclaim its former glory.

This strategy has already been implemented and is starting to show positive trends.

For the first ten weeks of the 2025 financial year, Pick n Pay recorded positive like-for-like growth alongside a consistently strong performance from Boxer.