Can Pick n Pay’s new look fix their troubles? New store design revealed

One of the biggest grocery retailers in South Africa, Pick n Pay, faced significant financial challenges, leading it to be technically insolvent.  

This meant the group had to find a way to make a turnaround and restore it to its former glory.

The plan included bringing back Sean Summers as CEO, listing its Boxer business on the Johannesburg Stock Exchange (JSE), and converting low-performing Pick n Pay stores to Boxer.

The retailer revealed its new store design last week at its new supermarket at Westown Square, in Shongweni, KwaZulu-Natal. Will this be the last act of the group to ensure they do not go back to being technically insolvent?

New store design

Summers said the new store design is aimed at enhancing the customer experience.

“These include an expanded fresh produce section, improved product range, and a stronger focus on convenience.

“We have implemented several improvements in the Westown store that we are already rolling out as part of our targeted store revitalisation programme, which is currently underway.

“These features are designed particularly around freshness and our fresh produce areas, the variety offered to customers, and customer convenience at its core.”

How the new store design by Pick n Pay look at Westown Square, in Shongweni, KwaZulu-Natal. Picture: Supplied.

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Store estate

He added that they have made progress on resetting the Pick n Pay store estate, which is resulting in a much more efficient and customer-focused estate.

They have completed the bulk of the estate reorganisation and are now accelerating store revitalization and opening strategically located new stores.

Summers said these will all be located in high-potential areas.

Revamping of seven locations

“Several stores have been transformed as part of the ‘Super Seven’ initiative, which revamped seven locations with improved layouts, a more tailored product selection, and intensive staff training,” said Summer.

He added that these stores have shown success, with some seeing sales growth of up to 100% and a positive trend in overall customer feedback.

Where did Pick n Pay go wrong?

Pick n Pay woes made headlines in 2023 when the group reported no dividends for its shareholders.

In its financial results for the 26 weeks ending 27 August 2023, Pick n Pay reported spending just under R400 million on diesel.

That is when Summers took over from Pieter Boone, who was the CEO at the time. Before coming back, Summer had served the retailer from 1999 to 2007.

“I hit the ground running and my focus is to return the core supermarkets business to growth and profitability and maintain the growth of other key parts of the business,” said Summers at the time.

How the new store design by Pick n Pay look at Westown Square, in Shongweni, KwaZulu-Natal. Picture: Supplied.

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What does it mean to be technically insolvent

When a company becomes technically insolvent when its liabilities exceed its assets.

Pick n Pay reported this in their audited results for the year ending 25 February 2024. However, Summer also announced that implementing a new strategic plan is already starting to turn the ship around.

 During that period, the retailer’s revenue increased from R109.28 billion to R115.37 billion, while trading expenses rose from R20.15 billion to R22.55 billion. Total liabilities exceeded total assets by R183 million.

Pick n Pay’s total assets were R46.51 billion and its total liabilities were R46.69 billion. The retailer reported a 373% decrease in its net profit, decreasing from a profit of R1.17 billion to a net loss of R3.2 billion.

Again, the group’s board decided not to declare a dividend for the 2024 financial year and suspended all dividend payments “until the board believes there is sufficient cash generation to review the dividend policy”.

Revamping of stores

In 2024, Pick n Pay embarked on revamping low-performing stores. It started by shutting 35 stores and converting another 70 to Boxer brand (in areas where this makes sense) or to PnP franchise operators.

This plan included closing down or converting more than 100 stores.

At first, the group did not see results from the store revamping, as in the financial results for the 21 weeks ending 21 July 2024, they reported sales going down by 0.8%.

How the new store design by Pick n Pay look at Westown Square, in Shongweni, KwaZulu-Natal. Picture: Supplied.

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The beginning of light

The Group’s interim results for 26 weeks ended 25 August 2024 showed light at the end of the tunnel.

Summers’ turnaround strategy was making a difference, with its online business booming. Which now they were left with Boxer’s IPO.

“The Boxer IPO remains pivotal to our strategy, and their remarkable performance continues to prove it is an exceptional business. We are excited to see it thrive as a listed entity,” said Summers.

“The Group has delivered on key milestones across its turnaround plan in a short period. This includes the successful conclusion of the 106% over-subscribed Rights Offer as part of the Group’s two-step Recapitalisation Plan, which raised R4.0 billion in new capital. In addition, the Boxer IPO will further strengthen the Group’s balance sheet, and remains on track for completion at the end of 2024.”

Listing Boxer

In November 2024, Boxer was officially listed on the JSE. Minutes after the listing, the share price was trading at R63, which the JSE believes will set the tone for other IPOs in 2025.

Through the IPO, Pick n Pay was aiming to raise R8.5 billion from the 157.4 million shares allocated to qualifying investors at a share price of R54.

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