Troubled retail giant Pick n Pay Group has announced measures to restore its core supermarket business to profitability after its audited results this week revealed a 373% decrease in net profit.
The measures include shutting down 35 stores and converting an estimated 70 others into the Boxer brand. The group is set to convert or close at least 100 stores in total. Pick n Pay registered a drop from a R1.17-billion profit to a R3.2-billion net loss and its basic earnings per share declined from 243.37 cents per share in 2023 to a loss of 661.67 cents per share.
The group delivered a weak financial year result to February 25, 2024, driven by a substantial trading loss in the Pick n Pay business, which more than offset a strong Boxer performance.
The result was further impacted by a significantly higher interest charge resulting from increased gearing and a R2.8-billion non-cash store asset impairment in the Pick n Pay business. The group said it is “resetting its store estate to minimise losses by creating a smaller but more profitable Pick n Pay store estate”.
It revealed that the plan is to leverage the strength of its multi-format model with strategic conversions to lift profitability.
“Selected Pick n Pay stores will be converted to Boxer, where customer demand and demographics call for it, while experienced franchisees will be secured for other stores given benchmarks prove that franchisees typically achieve greater trading density, largely as a result of trading areas being notably smaller than company-owned stores.”
It added that multi-year loss-making stores that are unsuitable for conversion to franchise or Boxer will be closed.
“This will allow the group to create a Pick n Pay store estate of the future – with effective, modern, well-positioned stores targeted at middle-income and more affluent customers.”
Pick n Pay CEO Sean Summers unveiled new board members and approved a six-point strategy in a bid to restore the group’s core Pick n Pay supermarket business to profitability.
The group said “an optimised operating model will focus on minimising waste, simplifying processes, driving execution, and improving staff productivity”, which will “deliver a more efficient head office, store estate, and supply chain”.
About R1.3-billion worth of benefits are targeted over the next three years by reducing costs.
Pick n Pay further revealed that Ackerman Investment Holdings (AIH) the controlling shareholder of Pick n Pay, and its related family have agreed to forego voting control.
“AIH will also relinquish the right to nominate the chairman, CEO and CFO immediately. The representation of the Ackerman family on the board of directors will be reduced to three members, Gareth Ackerman, Suzanne Ackerman and Jonathan Ackerman.
Raymond Ackerman who founded the group in 1967 passed away in September last year. David Robins, with 30 years of service including 22 years on the board is set to retire.
“The Ackerman family has for some time been considering the changing operating environment and the need for renewal at Pick n Pay. To quote a
favourite expression of my father, ‘We need to listen to the whispers of tomorrow’,” said Gareth Ackerman.
“The difficulty the business has found itself in recently has proved an opportune moment to accelerate the renewal process.
“This is a challenging but at the same time, very exciting time in our history. This is the right decision by the family and by me. We have full confidence in Sean and give him our every support,” he said.
Sounds if PnP is on the right track again just need to tweak a few things and stay with core business that made them PnP
When a business moves from profit to loss one cannot use conventional calculation to reflect the change. Therefore your calculation is 373% loss is incorrect and misleading.