Results and the numbers
Pick n Pay Stores Ltd. is showing early signs of a turnaround. The main supermarket unit cut its trading loss by 17% to 516 million rand in the 26-week period ending Aug. 30, while reporting volume growth. On a consolidated basis that includes the faster growing Boxer Retail Ltd. discount chain, trading profit increased 58% to 490 million rand, helped by a 105 million rand reduction in the Pick n Pay division's loss.
Investors noticed. During early Johannesburg dealings, the stock rose as high as 5.7% to 22.32 rand, marking the highest intraday level since May 26.
What management is doing
After returning in 2023, Chief Executive Officer Sean Summers set about stabilizing the business through pruning and rebuilding. Since his return, Summers shut down money-losing branches, committed fresh funding to Pick n Pay, and took Boxer public as one component of a multi-year roadmap aimed at getting Pick n Pay to break-even by fiscal 2029.
"We have to solve for our customers first," Summers said at the results presentation. "Once that gets its momentum and starts to rebuild that momentum again, then the outcomes flow. Then the profits will flow." He added, "We know that we still have some cash to burn in terms of the turnaround," noting that this is already factored into plans.
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Competition, costs, and staffing
The recovery is unfolding as the fight for South African shoppers intensifies. Shoprite Holdings Ltd. is pushing hard on price and expansion, and last year Walmart Inc. started launching outlets in the country carrying the Walmart name. Last year, Walmart Inc. started rolling out locations bearing the Walmart brand within South Africa. Households are again feeling the squeeze as oil prices climb and the outlook for the economy remains uncertain.
Pick n Pay reached an agreement with labor representatives to adopt a more flexible store staffing model, sidestepping a retrenchment process while it works to lower operating costs. Nevertheless, the 516 million rand trading loss indicates there is still ground to make up.
Leadership changes and what it means for your portfolio
Another handover is coming. Spencer Sonn - formerly the head of Woolworths Holdings Ltd.'s South African food division - was appointed CEO designate last month and will come on board next year to work alongside Summers. If the momentum in volumes and the narrowing core losses continue, management's plan points to a gradual rebuild rather than a quick fix, with Boxer's growth doing more of the heavy lifting near term and the legacy supermarket unit aiming for break even by fiscal 2029.
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