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By Moneyweb

Moneyweb: Journalists


As one Pick n Pay closes, a Checkers opens …

Often in its place!


On 30 September, Pick n Pay Hyde Park – which has been a mainstay (albeit a fading one) of that mall – ceased trading.

All that’s left now are the formalities … updating the Google Maps listing (done), packing up stock and sending it to other stores (underway), and removing the shop fittings (to come).

That the retailer spent what was likely a few million rand upgrading the store, which has always been a marginal (read: unprofitable) one, just a few years ago tells you how badly the group has been managed in recent years.

ALSO READ: Pick n Pay takes another thumping from Checkers

A chance to refresh

Landlord Hyprop had already confirmed the closure in mid-September when it released its annual results. It said: “Hyde Park Corner has reached an agreement with Pick n Pay to close its store, providing an opportunity to refresh this area of the centre and improve activity. Negotiations with a new food anchor are at an advanced stage.”

It’s an open secret that a Checkers will open in its place.

This is a trend across the country, with the most dramatic instance of these being the seven Checkers and one Shoprite opened in eight of the 10 East Rand Pick n Pay supermarkets owned by former franchisee John A Baladakis, whose business was liquidated by the retailer. Five of these were opened on a single day in April. The expansion by Checkers in the recent past has been nothing but relentless … ruthless even.

You can be sure that when the new Checkers opens in Hyde Park it will be far more compact than the store it replaces. That’s because Pick n Pay was about twice as large as it should’ve been … and confusingly had a half-hearted clothing section in store (probably as there was too much floor space).

Checkers’s next-generation stores, such as the one that opened in Rosebank Mall just up the corridor from a busy Pick n Pay, are half the size of its competitors.

Following Pick n Pay CEO Sean Summers’s announcement in May that the group would close or convert more than 100 stores, it was clear that the Hyde Park supermarket would be on that list.

It’s been trying to ‘encourage’ a franchisee to take over the store for years.

On most days, there are more staff than customers in the store (at least it’s slightly busy at lunchtime during the week). Getting in and out of the Hyde Park Corner parking lot is horrendously difficult (to be polite), and the new Checkers Foods convenience store 1km down Jan Smuts (which opened in December 2022) would’ve made Pick n Pay’s decision easy.

Ironically, if Checkers gets the Hyde Park proposition right, it will cannibalise sales from that smaller store.

ALSO READ: Pick n Pay’s franchise horror show

PnP’s plan

The immediate outlook for Pick n Pay is grim. Summers himself warned investors that it may indeed get worse before getting better (it is).

We already know that over 100 stores are “under review” and that it will either shut or convert these to franchise stores (where there are buyers) or to its mass-market Boxer format in markets where that makes sense.

This process is time-consuming given existing leases that are in place, and the group expects this to take until 2026. This will save the group R850 million (in expenses and “loss avoidance”), and it has booked a R1.8 billion impairment for this action.

This doesn’t include another R1 billion charge for stores that are “underperforming” but that the group wants to keep (translated: avoid ceding those markets to Checkers).

Between March and July, it had already shut four corporate stores and 12 franchise ones (the bulk of which comprised the 10 owned by Baladakis across the East Rand). Expect this number to accelerate. Pick n Pay also admits that its stores are simply too large, so alongside the closure of entire stores, it will reduce space across its estate.

Its disclosure (to date) manages to be detailed yet deliberately limited.

At the end of February, it had around 300 corporate-owned supermarkets and around 200 franchise stores in South Africa (excluding the 21 hypermarkets). Remove 100 from this base, and suddenly, you have a retailer whose footprint is 20% smaller than it was.

Checkers has 283 supermarkets and another 38 Checkers Hypers in SA. It will add another 38 supermarkets and one hyper in the coming year. Put differently, Pick n Pay is likely to close as many stores as Checkers will open by June 2025. It’s hard, at this point, to see how Pick n Pay manages to turn this around …

This article was republished from Moneyweb. Read the original here.

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