It’s never a good time to try and rescue a flailing uncompetitive business. But it would be difficult to think of a tougher time than right now for Sean Summers to be trying to resuscitate the barely alive Pick n Pay.
It’s not just rising oil and diesel costs, which have hit both the company and already-weary consumers; it’s the fact Pick n Pay is playing in a hugely competitive market.
Its competitors are not in the mood to give it the time or space to recover. And there’s absolutely no chance of a buoyant marketplace that would give it scope to trade out of its woes.
Which is why the recovery is taking even longer than the three years Summers initially tagged: now, months after promising a 2028 return to glory, the former retail great is expected to hit breakeven only in 2029.
Still beating
Unexpected disappointments are the sort of thing investors hate. On Monday, on the release of worse-than-expected full-year results and news of the delayed breakeven, the share price tanked. It was down almost 8% in early trade, just as Summers was assuring an analysts’ presentation the company “has a heartbeat, it has a pulse”.
On reflection, investors evidently became more upbeat. Pick n Pay’s shares recovered to close just 3.84% down at R23.29. It’s worth remembering that at that level it is 24% up on a three-month perspective. Of course, on a five-year backwards perspective things don’t look so good. It’s lost more than half its value.
Still, what’s the alternative? In mid-2024 it was the banks sending in a rescue team. So even a slower-than-expected recovery plan is still the best option.
Cash flush
The one thing the group has going for it is its current cash-rich balance sheet. As outgoing CFO Lerena Olivier told analysts, after the latest sale of R4.7bn of Boxer shares last week, the group has a R7bn kitty. This, said Summers, provides the sort of financial flexibility needed to support continued investment in key turnaround priorities and operational improvements. Plus, Pick n Pay gets to hold onto a controlling stake of Boxer. Just as well, given it is now – and for the foreseeable future – propping up the group’s income statement.
Kgomotso Mokabane, equity analyst at Sanlam Private Wealth, describes the sale as pragmatic. “The core Pick n Pay segment is not generating sufficient cash to fund the full turnaround comfortably, so creating additional financial flexibility was sensible,” Mokabane tells Currency.
But, of course, there’s a downside. “It reduces Pick n Pay shareholders’ exposure to the group’s strongest asset,” he says.
In the near term, the proceeds create breathing room and reduce the need to rely on external funding – but, says Mokabane, the investment case still depends on whether the core Pick n Pay business can move onto a sustainable path of cash generation without relying on Boxer.
Meanwhile, there’s all the interest on that R7bn to look forward to. In financial 2026, even before the R4.7bn hit the balance sheet, a R681m positive swing in net funding interest was the primary reason the group was able to report any profit before tax and capital items.
With R7bn in the kitty, as Olivier hints, it also means there’s an upside to the expected increase in interest rates in financial 2027.
Ill-suited stores
Summers seemed a bit irked by analysts’ criticisms of the recent unexpected sale of the Boxer shares. Some analysts wondered if this was a sign of poor planning. “We wanted to see how the Boxer share would perform before selling the full block; we’d have got considerably less if we’d sold it all at listing,” he tells Currency.
Yet selling the winner to prop up the loser still hurts, and in 2026 Boxer was definitely the former: its revenue grew 12% to R47bn, while Pick n Pay sales declined 2% to R73.6bn, partly due to the closure of 61 stores.
As Alec Abraham, senior equity analyst at Otto1890, points out, an additional aggravating factor is the unsuitability of a large chunk of the group’s store base. “Pick n Pay’s fleet of stores remains ill-suited to modern shopping trends; the large monthly shops are long gone, today consumers tend to shop smaller baskets and much more frequently,” he says. Unfortunately, Pick n Pay still has larger, fewer stores in mainly middle- to upper-income areas.
It’s an issue Summers is alert to.
“Trading density is key, we have a good number of stores that are way too big.” But apart from store closures there’s not much management can do for now. That will change when it comes to renewing leases.
‘Saved and solid’
However, longer term, Abraham reckons Pick n Pay faces the problem that Checkers and Woolworths have grabbed most of the viable locations.
While Summers’ two-year recovery projection has proved wholly unrealistic, a bit of blind optimism was probably necessary to take on a challenge of this magnitude. He reckons three priorities have largely been completed: the recapitalisation of the business, the re-establishment of leadership structures and the reset of the store estate.
“The remaining priorities are focused on restoring competitiveness, including the recently announced labour consultation process crucial to building a more competitive Pick n Pay,” he says.
Summers tells Currency he believes the company is “now saved and is solid”. From here on it’s about giving substance to the various initiatives that were launched and are currently bearing fruit. It’s also about continuing to build up his management team. “For the next year I’ll be 24/7 hands on, after that I will be working on selecting the conductor for a brilliant team.”
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Top image: Pick n Pay CEO Sean Summers. Picture: supplied.
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