Pick n Pay store closures explained

Pick n Pay’s results for the 26 weeks ended 25 August 2024 revealed that it continues to close franchise and company-owned stores across South Africa.

Pick n Pay has experienced a tumultuous period over the last few years, reporting record losses and becoming technically insolvent in the last financial year.

To address the challenges, the retailer launched a turnaround plan, which included a rights offer raising R4.0 billion and plans to list Boxer separately to raise more capital.

The turnaround plan aims to return the core Pick n Pay business to profitability and includes a ‘store reset plan’.

The company explained that there is a particular focus on eliminating losses incurred by specific loss-making company-owned stores.

“Where appropriate, lossmaking supermarkets are either closed or converted to Pick n Pay franchises or Boxer stores,” it said.

Pick n Pay is also focused on improving the performance of its remaining stores by driving like-for-like sales and optimising the operating model.

Over the last six months, Pick n Pay has closed 20 company-owned stores, including ten supermarkets, four clothing stores, and six liquor stores.

The retailer also closed 33 franchise stores, including sixteen supermarkets, four express stores, and thirteen liquor stores.

This means that the retailer closed 53 Pick n Pay stores across South Africa between 12 February 2024 and 25 August 2024.  

Pick n Pay CEO Sean Summers has previously said they would close 35 underperforming stores and convert 70 outlets to the Boxer brand.

However, in the latest results, Pick n Pay said due to the turnaround plan’s dynamic nature, the number of loss-making stores to be converted or closed will be evaluated regularly.

For example, through greater store discipline, some stores initially identified for closure have since become profitable.

“That isn’t the only change to our estate. We will also open several new Supermarkets before the end of the calendar year,” said Summers.

Following the latest closures, Pick n Pay still has 1,003 company-owned stores and 696 franchise-owned stores.

“We are steadily progressing to a better performing and more profitable store estate by closing loss-making stores,” Summers said.

He added that the interventions, including closing and converting Pick n Pay stores, created a store base which “makes a great deal more sense”.

The table below provides an overview of the Pick n Pay store closures and new stores opening over the last six months.

Pick n Pay turnaround plan

Pick n Pay told investors that its turnaround strategy is gaining traction with encouraging progress across several key strategic and operational initiatives.

The positives included a strong performance from its Boxer business and an underlying improvement in the performance of Pick n Pay supermarkets.

However, the retailer admitted that the first six months of the latest financial year remained challenging.

Group turnover grew 3.7% to R56.1 billion, with like-for-like sales growth of 2.9%. This was well below inflation.

The retailer reported a loss of R827 million for the six-month period, much worse than the R571 million loss over the same period last year.

Despite these challenges, Summers said they were quietly confident that they would reduce trading losses in the Pick n Pay segment by as much as 50% for the full year.

He said company-owned Pick n Pay supermarkets performed well in the first half of the financial year, with like-for-like sales growth increasing to 3.1%.

“This improvement reflects early signs of recovery, driven by more competitive pricing and enhanced product ranges for customers,” he said.

Pick n Pay Clothing continued to accelerate and gain market share, with 9.8% sales growth and an additional ten new stores in the half.

Online sales also saw impressive growth of 61%), driven by ongoing enhancements to the Pick n Pay asap! app, faster picking and delivery times, and an expanded footprint.

Pick n Pay admitted that much work still needs to be done to return the Group to profitability within the three-year timeframe promised to investors.

However, Summers said that early indications were positive and that the group was on the right trajectory. He said they were confident in stronger second-half earnings.

This was driven by reduced net funding costs from the recapitalisation plan and continued Boxer and Pick n Pay Clothing growth.

“Our focus this year has been strengthening our balance sheet and implementing the turnaround plan,” Summers said.

“Once our capital is in place, we can also start investing in refurbishing and opening new Pick n Pay stores.”