One of South Africa’s most prominent retailers, Pick n Pay, has confirmed the closure of an additional 32 stores across the country. This decision is part of an aggressive turnaround plan to revitalise the business and improve profitability after suffering substantial financial setbacks.
The closures include 24 company-owned stores and eight franchise locations, all part of the company’s ongoing strategy to optimize operations and focus on more profitable outlets.
Financial Performance and Operational Adjustments
In its latest trading update for the 45 weeks ending January 5, 2025, Pick n Pay revealed a mixed performance. Although like-for-like sales in South Africa grew by 1.9%, overall sales across the group saw a slight decline of 0.4%.
The retailer also converted five company-owned stores into franchise outlets as part of its broader restructuring initiative, the ‘Store Estate Reset’. This plan is designed to ensure resources are allocated to high-performing locations.
A Look at Pick n Pay’s Turnaround Strategy
Pick n Pay embarked on a comprehensive turnaround strategy following a challenging financial year in 2024, where the company reported an after-tax loss of R3.2 billion. This significant loss was largely due to a R2.8 billion non-cash impairment on the assets of company-owned stores.
The grocery division experienced a trading loss of R1.5 billion, which overshadowed the R1.9 billion trading profit generated by its discount retail brand, Boxer.
Pick n Pay successfully raised R4 billion through a Rights Offer in August 2024 as part of its recovery efforts. The offer was over double oversubscribed, reflecting strong investor confidence in the company’s future prospects. The separate listing of Boxer stores also contributed another R8 billion to the company’s capital base.
Bright Spots Amid the Challenges
Despite the store closures and financial difficulties, certain areas of Pick n Pay’s business continued to perform exceptionally well. Clothing sales in standalone stores surged by 10%, while online sales experienced a remarkable 42.5% increase. This growth was largely driven by the success of the Pick n Pay asap! delivery service and strategic partnerships with the popular Mr D app.
Meanwhile, Boxer stores remained a significant growth driver, recording a 12% sales increase during the first half of FY25 and sustaining double-digit growth throughout the 45-week period.
Improved Cost Management and Pricing Strategies
Pick n Pay’s improved pricing strategies and tighter cost controls have also contributed to its stabilization efforts. The company’s internal selling price inflation dropped to 2.4%, a significant improvement from the 8.2% reported in FY24.
This reduction in inflation reflects a more disciplined approach to pricing and cost management, enabling the retailer to offer better value to customers without compromising profitability.