Big changes at Pick n Pay

Pick n Pay has undergone significant changes over the last year, and more are expected over the next twelve months.

Pick n Pay has struggled over the last few years. It failed to compete effectively against Shoprite, and its share price plummeted by over 60% since 2018.

The company implemented its Ekuseni strategy to turn things around, but it was another disaster which cost the retailer billions.

The company’s latest annual financial results revealed the extent of the challenges Pick n Pay faced.

Pick n Pay reported a 373% decrease in net profit. It swung from a R1.17 billion profit to a R3.2 billion net loss.

For the first time, Pick n Pay has become technically insolvent. Total liabilities exceed total assets by R183 million.

Drastic action was needed. The retailer replaced its chief executive, Pieter Boone, with a company stalwart, Sean Summers.

Summers appointed a new management team to lead the company and implement its turnaround plan.

It also launched a R4 billion rights offer to strengthen the balance sheet and started closing struggling Pick n Pay stores.

It will also list its Boxer business separately on the JSE as a second step of the recapitalisation programme.

As part of its turnaround, Pick n Pay is rolling back many of the changes implemented under its Ekuseni strategy and closing poor-performing stores.

In the first 21 weeks of the financial year, Pick n Pay closed 16 supermarkets, including four corporate stores and 12 franchise stores.

It is converting Qualisave stores back to Pick n Pay stores and rebranding others to Boxer stores.

The biggest corporate development is that the Ackerman family has ceded control of the retailer.

The family is giving up 3% of its voting rights to support Pick n Pay’s transformation, bringing their voting share down from 52% to 49%.

Numerous board changes are also taking place. Gareth Ackerman is set to step down as Pick n Pay chairman, and Mariam Cassim and David Robins will leave the board.

Pick n Pay chairman Gareth Ackerman explains

Pick n Pay chairman Gareth Ackerman’s introduction at the company’s annual general meeting on Tuesday, 27 August 2024, summed up the situation.

He reflected on the difficult 2024 financial year and the escalation of the challenges the business was facing.

“While Pick n Pay Clothing and Boxer Superstores continued to show growth and success, our core Pick n Pay Supermarkets were declining steadily,” he said.

The board took action by appointing Pick n Pay veteran Sean Summers as chief executive, who, in turn, appointed a new management team.

He also introduced new operational structures, a comprehensive turnaround plan, and a multi-year trajectory.

Ackerman said it has been a time of great reflection for himself as chairman and for the Pick n Pay board as a whole.

“We all take accountability for the position we find ourselves in – one which developed over many years,” he said.

“We all take accountability for the action required to rebuild and restore Pick n Pay.  We will put all our energy into a better, stronger, innovative future.”

He said it was time for the Ackerman family to push for change. “We have now done exactly that,” he said.

“That has meant looking at the control structure and the influence we have on the board, and we have made the appropriate changes to support the turnaround of Pick n Pay.”

“Importantly, we have great faith in this special company, and along with the rest of the shareholders, fully participated in the rights offer.”

He added that once the balance sheet recapitalisation is complete and the turnaround is in place, it will be an appropriate time for him to step down as chairman.

“In due course, the board will make an announcement on my successor,” Ackerman said.

“It has been an honour and a privilege to serve the incredible company that my father and mother built.”

He said a positive energy has returned to Pick n Pay. “It may take time, but we will regain our rightful place in South African retail,” he said.