Pick n Pay closing supermarkets and renaming stores

Pick n Pay has closed numerous supermarkets, with more to come during the year. It is also cutting down on space and rebranding many existing Pick n Pay outlets.

Redefine Properties, which owns many of South Africa’s top shopping malls, has announced that it is taking back 10,000 square meters from Pick n Pay.

The company owns many of South Africa’s largest shopping malls, including Centurion Mall, Blue Route Mall, Cradlestone Mall, and East Rand Mall.

Its portfolio includes Benmore Centre, Centurion Lifestyle Centre, Kyalami Corner, Goldfields Mall, Golden Walk, Kenilworth Centre, and Horizon Shopping Centre.

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.

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.

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.

This is unsurprising. Pick n Pay CEO Sean Summers has previously announced that its turnaround strategy included assessing the performance of all its stores.

They identified many stores in critical condition due to factors like demographic changes or a problem with the shopping centre.

Summers said the struggling stores would be closed. “We will close and get rid of the stores that have no future,” he said.

In a presentation to investors, Pick n Pay said it would close 14 corporate stores in the current financial year.

Another part of the turnaround strategy is to convert some Pick n Pay stores into Boxer stores if the demographics in the region justify it.

During an investor presentation, the company said the Boxer team was actively pursuing more than 10 PnP store conversions.

Another big development is that the company will convert Qualisave branded stores back to Pick n Pay stores.

Pick n Pay started closing stores

Pick n Pay’s latest trading statement revealed that it had closed numerous supermarkets, including corporate and franchise stores.

The trading statement provided a financial and operational update for the 21 weeks ended 21 July 2024.

As promised by Summers, Pick n Pay closed sixteen supermarkets, including four corporate and twelve franchise stores. During the rest of the year, more stores will be closed.

This could be expected as the results were poor. Pick n Pay sales only grew 0.1% over the period, significantly lower than inflation.

Even when looking at like-for-like sales, which excluded discontinued Pick n Pay stores, it was still a paltry 1.1%.

Pick n Pay explained that its total sales lagged like-for-like sales because it closed numerous stores during the period.

To put this performance in perspective, Shoprite, which owns Checkers and Shoprite, achieved 10% growth over a similar period.

It is also noteworthy that Checkers and Shoprite are taking over a chunk of the retail space where Pick n Pay closed stores.

Despite the dismal performance and closing stores, Pick n Pay remained upbeat about its prospects amidst its turnaround plan.

Summers said their management team has made encouraging progress in implementing the multi-year turnaround plan to return Pick n Pay to profitability.

The retailer explained that it targets like-for-like sales growth as a key turnaround indicator for Pick n Pay’s South African supermarkets.

Like-for-like sales have steadily improved, from -0.4% in H2 FY24 to +2.0% over the last few months.

However, a concern is that like-for-like sales of its South African franchise supermarkets were a disappointing -0.8%.

Company-owned supermarkets have rarely outperformed franchise supermarkets over recent years.

Pick n Pay said this trend reversal further confirmed early progress in the turnaround of company-owned supermarkets.

However, revitalising the performance of the franchise stores remains a key priority for the retailer.