Pick n Pay in revamp after R1.67bn loss

Ackerman voting control to fall slightly below 50%, family relinquishes right to nominate chair, CEO and CFO

27 May 2024 - 14:05
By Nqobile Dludla
CEO Sean Summers is tasked with reviving a business that has been losing market share to bigger rival Shoprite and others for more than a decade. File photo.
Image: Siphiwe Sibeko/Reuters CEO Sean Summers is tasked with reviving a business that has been losing market share to bigger rival Shoprite and others for more than a decade. File photo.

The Ackerman family, which founded Pick n Pay, will relinquish control of the struggling retailer as part of a revamp aimed at stemming losses, cutting debt and regaining market share.

Gareth Ackerman will also retire as chairperson after 14 years in the job and 40 years at the company, though he will stay on to support management until next year's annual results.

New CEO Sean Summers is tasked with reviving a business that has been losing market share to bigger rival Shoprite and others for more than a decade.

Founded by Raymond Ackerman in 1967, Pick n Pay was once South Africa's largest retailer, but “inappropriate strategic initiatives” over the past decade failed to prevent profit declines in the core business, Gareth Ackerman said on Monday.

This led the group, whose crown jewel is discount grocery chain Boxer, to report a comparable loss before tax and capital items of R1.67bn in the year ended February 25, from a profit of R1.8bn the year before.

Summers announced a two-step recapitalisation plan earlier this year that includes a rights issue to raise up to R4bn and Boxer's listing to cut the group's R6.1bn debt and help fund its new strategy.

Ackerman Investment Holdings (AIH) supports the plan and will invest up to R1.025bn in the rights offer.

But AIH and related people have also agreed to forgo control of Pick n Pay, such that their voting rights will fall slightly below 50% after the planned offer, the company added.

AIH will also relinquish the right to nominate the chair, CEO and CFO and the Ackerman family's representation on the board of directors will reduce to three members from four.

“We need new blood and ideas,” Gareth Ackerman said.

CFO Lerena Olivier told investors the retailer needed about R10bn-12bn of capital, with R6bn-R8bn projected to come from the Boxer listing.

Under Summers' new plan, more than 100 loss-making Pick n Pay supermarkets will be closed or converted to Pick n Pay franchise or Boxer shops, resulting in about R850m of savings.

He said he expected the core Pick n Pay business to break even in its 2027 financial year and would also revamp the company's operating model, with about R1.3bn in cost cuts targeted over the next three years.

“It's not a race to see who can have the most shops. Retail is not about having the most shops, it's about which shops and where and for us it's going to be a flight to quality not quantity.”

Reuters