If “vibe shift” is the leitmotif of the day, it’s true for Pick n Pay management too. A year on from posting the biggest full-year loss in the retailer’s history, CEO Sean Summers and CFO Lerena Olivier were clearly feeling far less downbeat about prospects.
For one, Pick n Pay’s mammoth recapitalisation and Boxer unbundling means it’s debt free, with R4.4bn cash on its balance sheet and no interest payments to speak of. While it made an after-tax loss of R737m for the 53 weeks ended March 2, that’s a far cry from 2024’s R3.3bn hole. Same-store sales – a critical measure – are rising too. And then there’s the more intangible aspect of a team that is confident enough to state that “we will not chase quick gains”. Currency spoke to CEO Sean Summers.
Sean, you said investors are going to have to wait for 2028 to see a break-even for trading profit, after lease interest. That’s bit longer than expected …
That’s if we just look at the core underlying Pick n Pay piece of the business; as a group, we’ll be there prior to that, but as I said in the presentation, you can only be as happy as your unhappiest child which I thought was a fairly good analogy of our situation. The child will heal because its siblings support it.
When I returned originally to the company … I made the prediction that it would be a multiyear journey and maybe [take] three years. Now that we have the benefit of real understanding of what has to be done in the company, we have pushed it back by a year. My problem is where Pick n Pay will be in five, eight, 10 years’ time – that’s the most important thing. There are things we could do now to meet that date, but we would be compromising what we need to do post that.
Such as?
We could do things like not have the Springbok sponsorship, which obviously costs a fair bit of money – but you have to look at the flip side of that: not only does it reinvigorate enthusiasm within the company but it opens up opportunities for us to engage with the broader South African community, right the way down to schools rugby. We’ve got a very good relationship with FNB and there’s fantastic stuff we can do together. It’s investments in our asap! business: we’ve poured a lot of capital into redeveloping the backbone of that.
So there are all these things we’re doing now to ensure the quality of the turnaround. We had lost, to a fair degree, our institutional intellect and that’s why I talk about restoring the muscle memory in the company. A lot of stuff we would have done instinctively, we lost a lot of those people and skills and they take time to get back.
Lerena Olivier said you’d invest in people first and then bricks and mortar – but wasn’t it a lack of investment in your physical stores that is partly to blame for Pick n Pay’s slide?
Absolutely people first, and we are doing a bit of both. I can go visit stores that are recently opened and that have all of the best of everything but if you don’t have the right human spirit driving the store you have a problem. Some of our stores that still trade their heads off are not in the greatest of shape physically – but because the staff and everybody in the store is so good, people go there and love it. So it’s a combination.
You repeatedly said in the presentation that Pick n Pay has to invest ahead of its recovery. Do you have the cash to do that?
Sure. If we had billions we could throw it at the company and jump into every potential store opening; I don’t think that’s where we need to be. We need to worry about the quality of the turnaround and make sure that, store by store, we are making the appropriate investments.
There are some who are a bit worried about lease expirations where you lose exclusivity in centres. Is there cause to worry?
On the stores where we do have exclusivity expiring, that goes both ways: there are opportunities for us to go into other centres as well, so it’s not just a one-way journey.
We talk to the landlords. I had our biggest single landlord in my office last week with the entire management team and the first thing he said was: “Wow – the change we’re seeing in our store infrastructure with you, it’s just a different company.” And it’s not about physical investment, it’s the people.
Where corporate same-store sales rose 3.6%, for franchisees it’s only 1.1% better. You said in the presentation they account for half Pick n Pay revenue but it stands to reason that they would lag. Why?
If you go through the dark years of Pick n Pay: the franchisees – because they have their own skin in the game – would have done everything to ensure that they lost as little as possible in their own endeavours. So as we’ve turned the company around it stands to good logic that the opportunity for getting sales back in the corporate business would be there.
The other thing is that most of the growth of asap! is in the corporate store environment. The reality is that with franchise stores, if they don’t carry the full range that Pick n Pay carries, the execution of asap! would be predominantly in corporate. So as we’ve got the franchisees now to start listing more of a full range, we are putting more of asap! into franchise. They are now solidly into like-for-like growth.
Has there been any tension between yourself and the franchise owners?
No, not at all. I spend a lot of time with them, and we’re in this together. Without us they’re nothing, and without them, we’re nothing.
You’ve also appointed a head of innovation and digital – what have they been tasked to do?
We’ve put into that cluster all the future of what we’re going to be doing with new technologies. And the whole area around banking and financial institutions, value-added services, mobile telephony, airtime, retail media … we’re already getting quite good revenue out of the data we have – 10-million people on smart shopper – which gives us a huge database. They are crucial roles, and it doesn’t mean to say that we haven’t been doing anything but one needs to have a better focus.
Your contract has been extended to 2028: is that for you to see out the recovery, and are you going to be responsible for picking a successor? And would they come from within Pick n Pay?
My original contract would have seen me leave next year, which means I would have had to appoint somebody this year and I think with the stability that we have in the management team at the moment, it’s not appropriate at this time to introduce another element, another voice maybe wanting to take things in a slightly different direction again. So we wanted that continuity and that execution. And [by the time] I leave it won’t be job done. For me it’s important to see this journey through and part of that is succession; whether it comes from within that would be ideal and first prize, but let’s see what happens.
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