Two years ago, the question being asked in boardrooms and analyst briefings was blunt: could Pick n Pay survive? When CEO Sean Summers presented the group’s full-year results recently, his answer was broadly “yes”. But then, he would say that, wouldn’t he? Not everyone is convinced the recovery is as secure as he suggests.
Pick n Pay turns 60 next year, but much needs to be done if that landmark for a retail household name is to be a celebration.
When Summers took over for the second time in March 2024, he inherited a company that had maxed out its credit, breached covenants across an 11-bank lending group, and owed R11bn. Liabilities had exceeded assets for the first time in the company’s history, leaving it technically insolvent for most of that year.
Over the years, dividends had continued to flow while store investment was neglected, labour structures grew bloated, customer service slipped, and the estate included stores burdened with oversized storage space that could neither be repurposed nor sublet.
Summers has since described the company as having been “destroyed and hollowed out from the inside. We forgot what we stood for.”
The roots of the crisis run deep. In the 1980s, Pick n Pay was among the most technologically advanced retailers in the world. It pioneered scanning and supply chain systems ahead of giants such as Australia’s Coles Myer — an edge that helped it open a store in Brisbane.
But that expansion collided with apartheid-era politics: even though the company was a vocal domestic opponent of apartheid, with roughly half its management roles held by black South Africans, Australian unions mobilised against it as a South African import. A second store under construction in Melbourne was blocked, and the company withdrew from Australia in 1986.
A second attempt was made at the Australian market in 2001, through the acquisition of the struggling Franklins chain, which was eventually sold to Metcash at a R550m profit.
At home, by the mid-2000s Pick n Pay’s supply chain had become a liability. It was a fragmented network of small warehouses and direct supplier-to-store deliveries that left trucks backed up at loading bays as the store count grew.
The company’s leadership prioritised expansion over logistics, just as Shoprite and Woolworths were building the centralised distribution networks that would cut their costs and tighten stock flow. But at Pick n Pay, says veteran retail analyst Chris Gilmour, the push for distribution efficiency was blocked internally for years, entrenching a gap behind Shoprite that has never closed.
Leadership churn made things worse.
Summers, who joined the company as a trainee manager in 1974 and took over from founder Raymond Ackerman in 1999, led Pick n Pay through a period of clear market leadership. The year after he left in 2007, the group reported close to R1bn in earnings, with a return on equity of 132%, three times Shoprite’s.
But Summers’s departure was abrupt, believed to be the result of a strategic disagreement with Ackerman rather than, as some speculated, his taste for fast cars. What followed, says Gilmour, was “a succession of mistakes over many years while the competition kept getting stronger”. Nick Badminton, a 27-year company veteran, ran the business apparently competently from 2007 to 2012, but margins deteriorated and systems aged on his watch.
Around this time, the first grumblings could be heard about Pick n Pay developing a soft underbelly. Rival Shoprite, in particular, looked a leaner and meaner retail prospect. Already in March 2009, Ackerman — speaking to journalists assembled for his retirement function — betrayed a significant strategic vulnerability when he suggested that Pick n Pay’s important operating margin could not be fattened to the levels then enjoyed by Shoprite.
Financial magazine Finweek quoted Ackerman saying: “I would not, in today’s economic climate, want to make a margin of 5%. I would knock it down.” In the ensuing years, Shoprite’s margin broadened even further, while Pick n Pay’s ultimately thinned out.
Richard Brasher, recruited from Tesco UK in 2013, became the company’s first outsider CEO. Under him, the store network nearly doubled, turnover grew from R55bn to almost R90bn, and the centralised logistics model the business had long resisted was finally embedded.
The market’s verdict was that Brasher stabilised and modernised the company without fully restoring its competitive position — and the cost-cutting that accompanied his turnaround stripped out capability, whose absence became apparent only after he left.
His successor, Dutch executive Pieter Boone, lasted 2½ years before being asked to leave. The share price fell 32% during his tenure. He left with a R15.8m termination settlement even as his unvested incentive shares were forfeited.
Gilmour regards Boone’s central strategic call — splitting the core supermarket business under the “Ekuseni” strategy, with Pick n Pay serving higher-income shoppers and a new QualiSave format targeting the middle market — as one of the worst decisions in the company’s history. It confused shoppers without making anything cheaper or better.
Pick n Pay posted its first annual loss in 57 years.
Shoprite, meanwhile, has been run by just two chief executives since 2007 — Whitey Basson and Pieter Engelbrecht.
Through much of this century, the Ackerman family still dominated the board, which was criticised for moving too slowly on technology and store investment, while paying out roughly three-quarters of operating profit as dividends. More than half of this flowed to the Ackermans’ own investment vehicle.
The family called it “patient capital”: the freedom to take a long view rather than chase quarterly results. But that long view came at a cost. Shoprite was digitising its customer data and rebuilding its supply chain years ahead of its rival, and the gap compounded. Eventually, the family who had spent decades defending their control were forced to give it up: Raymond’s son Gareth stepped down as chair in 2025 after 14 years in the role.
“Had Summers not returned, Pick n Pay would have gone under,” Gilmour says of the 2023 decision to bring him back at the family’s request. “The debt was out of control, market share was falling, and everything was moving in the wrong direction.”
The 2024/2025 recapitalisation — a rights offer, followed by the unbundling and JSE listing of discount chain Boxer — turned the group from heavy net debt into net cash.
The Boxer IPO, which Summers describes as something the group “had to do to survive”, priced well above expectations. Between the rights offer and the sale of 34.4% of Boxer, the group secured about R12.5bn in new capital to repair its balance sheet and fund the core supermarket turnaround.
In May this year, Pick n Pay sold a further 12.5% of Boxer for R4.7bn, reducing its controlling share from 65.6% to 53.1%, with Boxer valued at about R37bn — more than 50% above its valuation at listing seven months earlier. The Pick n Pay group now holds R7.2bn on its balance sheet along with the stake in Boxer, a dramatic reversal from two years earlier.
Financial results for the year to March 1 2026 were mixed.
Group turnover rose 5.6% to R118.6bn, roughly in line with inflation. Trading profit surged 334% to R1.76bn, from R405m the year before, and the pre-tax loss narrowed 83% to R237m.
The Pick n Pay supermarket segment, as distinct from Boxer, cut its trading loss from R1.5bn to R549m and returned to a trading profit in the second half. Boxer, the standout performer, grew revenue 12% to R47bn, with trading profit up R330m.
Cash losses, however, worsened from R1.7bn to R2bn. That pushed the group’s breakeven target out to FY2029. Pick n Pay supermarket sales fell 2% to R73.6bn, partly the result of 61 store closures. Clothing, which had been a bright spot, underwhelmed: revenue grew just 5.3%, with like-for-like growth of just 0.7%, hurt by operational issues that kept clothing off the asap! delivery app in time for Black Friday. The clothing division opened 22 new stores, taking its total to 437.
Summers broke down the turnaround into what were described as six sequential initiatives: stabilising the balance sheet; rationalising the store footprint; rightsizing the support office; restructuring the supply chain; rebuilding the brand; and, now, tackling labour costs. The sequencing, he says, was deliberate. “If we’d undertaken all of these blocks with the same ferocity at the same time, we would have snapped the company like a twig.”
The supply chain restructuring is largely complete, with the oversized Eastport distribution centre now shared with other businesses. On the franchise side — where stores buy most stock through the central distribution network in exchange for a brand royalty, but aren’t contractually obliged to buy there — the group says purchasing loyalty is improving as it works to rebuild relationships and ease margin compression. It is hunting for a rebate and royalty balance that keeps franchises competitive at the checkout till without eroding the group’s own margins.
Like-for-like sales growth at company-owned supermarkets accelerated from 3.3% to 3.9%, with gross margins up 40 basis points. This is notable, management argues, given that nearly 90 stores have closed over the past two years, while rivals have opened hundreds of new locations.
In the eight weeks after the reporting period, sales growth strengthened further to 4%. “Despite having all that other available optionality, consumers have elected to go to Pick n Pay,” Summers says. Fresh food (a category he says was “handed on a plate” to competitors) has had a “phenomenal” recovery, though he is candid that pet food, baby products and health and beauty remain areas that were ceded to rivals.
Elements said to be tracking at industry pace or better are the Smart Shopper loyalty programme, a fledgling retail media business, data monetisation and asap!.
The most immediate, and politically sensitive, challenge is the section 189 restructuring process, covering 22,000 employees in the group’s national bargaining unit.
The company wants to restructure working conditions rather than cut headcount outright — principally by reducing Sunday pay and shifting more full-time staff onto weekend rosters, when shopping volumes peak. Employee costs account for more than 41% of trading expenses, well above comparable retailers, and the group says it has spent more than two years in talks with unions without material progress.
Historically, says Summers, “for a protracted period, a lot of well-intended concessions were given. We’ve always had a generosity as a company, of wanting to look after our people. But our reality is that it is no longer sustainable.”
If no agreement is reached within 60 days, retrenchment notices may follow alongside an offer of employment on revised terms. Asked about the risk of strike action, Summers points instead to “palpable” concern among staff for the company’s future, recalling a conversation with a third-generation Pick n Pay employee who hopes her own children will one day work there too.
About 60% of bargaining unit employees belong to a union, the great majority to the South African Commercial, Catering & Allied Workers’ Union (Saccawu).
Saccawu acknowledges the company’s difficulties but has warned that it is “preparing for the mother of all battles” to protect members’ livelihoods.
Brenita Cloete, the union’s first deputy president, says its core complaint is that the company has not defined what its proposed “flexible” model would mean in practice or disclosed how many workers might face retrenchment. For now, she says, the company’s evident priority is cutting working hours from 196 a month to 176 — a change that, she argues, would cut some employees’ monthly pay to about R2,000.
Cloete disputes management’s framing of labour costs, arguing that more than half the group’s R12bn annual wage bill goes to executives and senior managers, with only about R3bn covering those in nonmanagement roles. And she points out that the company is budgeting R174m for labour brokers this year — more, she notes, than the cost of the guaranteed 13th cheque the union is being asked to give up.
Saccawu says it can accept some flexibility, but not a downgrading of conditions and benefits. It argues that the group’s problems stem from “mismanagement and outdated market strategies” — including a store footprint skewed towards middle- and upper-income areas, leaving competitors like Shoprite and Usave to pick up price-sensitive shoppers. The union has also questioned whether the retrenchment threat is genuine, calling it a pressure tactic.
Analysts’ views of Pick n Pay’s prospects range from cautious to alarmed.
Nedbank Securities’ Paul Steegers has a neutral rating. He turned “less positive” after the results, cutting earnings forecasts and pushing his own breakeven estimate out to FY2031, two years beyond management’s 2029 guidance.
Steegers expects cash burn from the loss-making supermarket segment to stay near R2bn a year, with further losses likely over the next three years. A successful new labour agreement could save roughly R700m annually, though actual savings may be lower and there would be one-off retrenchment costs in the near term.
“Without a successful outcome [on section 189], I think it’s going to be very difficult to get to breakeven,” he says. “It could get messier before it gets better.” He sees little likelihood of a foreign buyer emerging, given the complexity of the group’s franchise footprint and store lease portfolio.
Jean Pierre Verster of Protea Capital Management is more encouraged, largely because he believes management has finally confronted reality.
“For the past 10 years, my concern was that they weren’t realistic about their challenges,” he says. “I got the distinct sense, from Sean Summers’s comments, that finally they have taken off the rose-tinted glasses.”
With around R7bn on the balance sheet and the controlling Boxer stake intact, Verster believes the group has sufficient runway, though he flags three issues: the section 189 outcome and strike risk; underused hypermarket space, where about half the floor area sits idle under the more centralised distribution model while costs such as water and electricity keep accruing; and the franchise structure itself, where wholesaler and retailer each chase their own margin, unlike Shoprite’s vertically integrated model.
“Shareholders have already swallowed a bitter pill,” says Verster. “Labour may need to do the same — because if it does not, it is not a sustainable business, and the job losses will be far greater.”
Veteran retail analyst Syd Vianello is more troubled by the scale of the gap that has opened.
“What is very scary is the extent to which Pick n Pay has fallen behind its major competitor,” he says. Shoprite’s South African division alone is likely to turn around R230bn this year, against Pick n Pay’s roughly R70bn. Even including Boxer, the group is only about half Shoprite’s size.
Twenty years ago, the two were comparable in scale. Today, Vianello says, Shoprite’s supermarket business generates more than R3 of sales for every rand sold through Pick n Pay. He argues that sorting out labour costs alone won’t fix the business. The real battle is gross margin, where Pick n Pay’s sub-18% is unsustainable at current volumes.
Smaller volumes mean underused distribution centres (Pick n Pay and Boxer run separate networks, against Shoprite’s single operation with R230bn in turnover), weaker supplier rebates and a franchise network earning a fraction of company store margins.
“You’ve got to push volumes through the distribution centres,” says Vianello. “And to do that, you need new stores in areas where the population has relocated. But new stores require capital.” Still, he believes Pick n Pay will survive. “There’s always a place for No 2 and No 3. But there’s a hell of a lot of fixing up to do and it all starts with the gross profit.”
Evan Walker of 36One Asset Management is similarly downbeat, pointing to cost growth running at 6%-7% against revenue growth in the low single digits, with the franchise division a particular disappointment. He notes that competitors show no sign of easing off. Shoprite’s Checkers chain has been “unstoppable”, and Woolworths Food and others continue to add space aggressively.
Walker is also wary of consumers being under pressure, while Chinese online retailers are undercutting general merchandise categories that have traditionally meant strong margins for grocers and, he estimates, make up 20%-25% of revenue at retailers like Pick n Pay. He credits management’s work on shrinkage and margin control but sees little relief on the macro horizon. “It’s a very tough environment to turn a business around in.”
John Biccard of Ninety One, one of South Africa’s most prominent value investors, takes the opposite view.
Pick n Pay is one of his two largest retail positions, alongside Truworths. He describes them as the sector’s two cheapest stocks. He argues the market is effectively pricing the core Pick n Pay business, excluding Boxer, at negative R15bn — implying that the business will lose money indefinitely. It’s a level of pessimism he finds compelling enough for him to take the other side of the trade.
Biccard points to balance sheet strength as the key to his thesis: more than R5bn in cash, plus a remaining Boxer stake worth more than R22bn, give the group enough runway to sustain current losses for years without raising new capital, thus removing the balance sheet risk typically associated with deeply distressed valuations.
He also sees merger & acquisition options in the store network itself, arguing it would make an attractive entry point for an international retailer seeking a meaningful South African presence. He singles out Walmart, which has ambitions to expand locally and would need 300-400 stores to build a proper footprint — and whose merchandise mix, he notes, is surprisingly close to Pick n Pay’s.
How the labour restructuring is resolved could go a long way to giving credibility to the turnaround. Summers has two years left in his term and he may not be in place to see the recovery through to its FY2029 breakeven target, making succession another variable for the market to watch.
Summers is clear, at any rate, about the ambition: not to reclaim the race for scale against Shoprite. “That race is run,” he says. The goal is now to be the “most loved”.
What remains unspoken publicly is the Ackermans’ intention. The family’s voting interest in Pick n Pay is down to 36.8%, but they remain a major shareholder. Whether the founder’s children and grandchildren are committed to Pick n Pay for the long haul, or are quietly weighing an exit, remains to be seen.
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