Retail

Pick n Pay CEO shares good news

Pick n Pay CEO Sean Summers told investors, “The worst is behind us”. The retailer’s turnaround plan is progressing better than expected, and its balance sheet has improved.

Pick n Pay released its interim results for the 26 weeks ended 25 August 2024, which revealed an improvement in the retailer’s balance sheet.

The company’s latest full-year results, released earlier this year, revealed that the retailer was technically insolvent. This means its liabilities outweighed its assets, leading to negative equity.

However, in the past six months, Pick n Pay has turned this situation around, and its equity is now back in the green.

This does not mean that Pick n Pay is without challenges – in this interim period, the retailer’s loss deepened significantly, and it closed over 54 franchise and company-owned stores.

However, there was an improvement in its revenue and its trading profit increased by over 150%.

In addition, the company’s plan to save its finances is nearly complete and set to clear the company of all its debt.

This attack is two-pronged. The first step was a R4 billion Rights Offer, and the second was Boxer’s unbundling and separate JSE listing.

The Rights Offer, which took place in August this year, was a big success for the retailer. It was 106% oversubscribed, with total subscriptions reaching over R8 billion.

The company said 98.7% of shareholders followed their rights, and the retailer received R4.3 billion in excess applications.

At the time of the announcement, Pick n Pay said this underscores shareholders’ strong confidence in the retailer’s turnaround strategy, leadership team and future growth plans.

The proceeds of the Rights Offer will be used to pay down debt, stabilise the balance sheet, and invest in Pick n Pay’s turnaround strategy.

The second part of Pick n Pay’s strategy is to unbundle and list its Boxer business for between  R6 billion to R8 billion.

At Pick n Pay’s interim results presentation, CFO Lerena Olivier said the company is ready to proceed with this listing but will wait for more favourable market conditions before making the decision.

The company expects to list Boxer sometime this year or early next year.

The proceeds from this listing will clear Pick n Pay’s debt, leave it with cash on hand, and allow the company to focus on growing in South Africa’s highly competitive retail market.

Despite the progress made with these two major steps, Summers told investors at the company’s interim results presentation that there is still a lot of work to be done.

“Exactly a year ago, when I re-joined Picked Pick n Pay, I forecast that this would be a multi-year journey and that it would get worse before getting better,” he said. 

“Our earnings for the first half reflect this, and I am confident that the worst is behind us now.”

He said the company’s focus this year has been strengthening its balance sheet and implementing its turnaround plan. 

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

In the interim period, Pick n Pay opened 29 company stores and closed 21. Boxer constituted 17 of these new store openings and only one closure.

Pick n Pay also opened 7 new franchise stores in the period but closed 33, bringing the total number of franchise stores to 696.

At the results presentation, Summers explained that this was in line with Pick n Pay’s current strategy, as the retailer aims to prioritise quality over quantity.

In addition, Boxer’s remarkable growth and, now, Pick n Pay’s strengthened balance sheet, will allow the retailer to open far more stores in the coming years, without worrying about struggling stores that no longer serve the company’s needs.

In its results, Pick n Pay revealed that Boxer’s store opening programme contributed 4.3% to total sales growth, with 12 net new stores, including one Pick n Pay conversion, added over the period.

It also said the pace of new stores will accelerate in the second half of the year, with 53 more stores planned across all formats – bringing the total net new stores planned for FY25 to 65. 

Summers told Daily Investor that the progress the retailer has made so far this year sets it up for success and competitiveness in the next few years.

Boxer’s IPO will allow it to clear the company’s debt and reinvest the remaining funds in its core business.

He said there is still a market for Pick n Pay in South Africa, and the steps they have taken to date will allow the retailer to grab those opportunities.

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