How did Pick n Pay do it? From technically insolvent to growing sales in months

Pick n Pay Group, once technically insolvent, has made a turnaround in its finances in just months.  

The Group’s results last year showed it was technically insolvent.

Pick n Pay released its interim results for 26 weeks ended 25 August 2024 on Monday, showing its turnaround strategy is making a difference, with its online business booming.

ALSO READ: Pick n Pay technically insolvent, but new strategic plan will turn the ship

Pick n Pay losses

The Group’s CEO, Sean Summers said he is confident that they will reduce trading losses by as much as 50% for the full year. Results show that it recorded a loss of R827.4 million after tax, which is an increase compared to the same period last year.

“We are steadily progressing to a better performing and more profitable store estate by closing loss-making stores, converting stores to franchise, or to Boxer. Our estate is starting to make a great deal more sense.”

The group’s other focus is on its store reset process, which they view as a key priority in its turnaround strategy.

The store reset process will address loss-making Pick n Pay stores, which disproportionately affected the group’s performance in the first half. They closed 14 underperforming stores and completed the first successful conversion to Boxer.

Pick n Pay sales grow

Summers added they have seen strong sales growth in Pick n Pay Clothing and Pick n Pay Online.

“Pick n Pay Clothing continued to accelerate and gain market share, with 9.8% sales growth and an additional ten new stores in the half.”

When it comes to online sales, there was a growth of +60.6%, driven by ongoing enhancements to their app, which includes an expanded footprint to 550 locations.

“Group turnover grew 3.7% to R56.1 billion, with like-for-like sales growth of 2.9%, with performance varying across divisions. Boxer recorded strong sales growth of 12.0%, well balanced between like-for-like sales (+7.7%) and sales from new stores (+4.3%).”

ALSO READ: Pick n Pay to convert 70 stores to Boxer, close 35 in revamp strategy

Boxer shines through

The results show that Boxer recorded trading profit up 16% year-on-year.

“The Boxer IPO remains pivotal to our strategy, and their remarkable performance continues to prove it is an exceptional business. We are excited to see it thrive as a listed entity,” said Summers.

Pick n Pay supermarkets also saw significant performance for the first half of the year, with like-for-like sales growth increasing to 3.1%, moving out of the negative territory recorded in the second half of financial year 24, which was -0.5%.

Recovery plan

Summers said their customers benefited from lower prices through the group’s investing reduced load shedding costs into lower prices for essential items, and keeping internal inflation at 3.4%, below market averages.

“Through greater store discipline and execution, some of the stores initially identified for closure have since become profitable. And that is not the only change to our estate; we will also open several new Supermarkets before the end of the calendar year.”

While much work still needs to be done to return the group to profitability within the three-year timeframe provided for in the turnaround, Summers said that early indications are positive and that the group was on the right trajectory.

“The Group has delivered on key milestones across its turnaround plan in a short period. This includes the successful conclusion of the 106% over-subscribed Rights Offer as part of the Group’s two-step Recapitalisation Plan, which raised R4.0 billion in new capital. In addition, the Boxer IPO will further strengthen the Group’s balance sheet, and remains on track for completion at the end of 2024.”

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