Sean Summers.
In the face of significant capital constraints, Pick n Pay will continue to find ways to invest in its stores as it endeavours to turn the business around, says the group’s chief executive Sean Summers.
Summers, who was recently appointed to the position after having led Pick n Pay between 1999 and 2007, spoke to the Mail & Guardian on Wednesday following the release of the group’s dire interim results earlier that morning.
“We are capital constrained at the moment. But having said that, the capital that we have, we are continuing to deploy in Boxer, which is an unbelievably successful operation for us,” Summers said.
“And even in Pick n Pay, we will continue to judiciously deploy capital in the prime trading stores where we know we get an almost immediate return. And as we turn the volumes around, and get the company turning around in the right direction, we will have sources of capital to do what we need to do.”
Boxer, Pick n Pay’s discount chain, was a bright spot in an otherwise grim set of results, which showed that the group endured an interim pro forma loss before tax of R837.2 million.
Pick n Pay’s R31.8 million trading profit for the 26 weeks ended 27 August would have been R596.8 million had it not been for abnormal costs the group incurred during the period. These costs include R259 million for restructuring, R190 million for energy and R116 million of duplicated supply-chain losses.
The retailer’s dire results, which saw it scrapping its interim dividend, caused its shares to plummet more than 14%.
Shareholders were, however, primed for this outcome following Pieter Boone’s unceremonious resignation as Pick n Pay’s chief executive. The group announced that Summers would take over earlier this month.
Summers said that looking in from the outside, he could tell that Pick n Pay’s downfall lay in its failure to reinvest in refreshing its stores.
“We did a big cleanup in the late 90s. This is now 20 years later. And retail is a very hard business in terms of its physical assets. They get hammered at store level,” he explained.
“So I was just seeing that there wasn’t a reinvestment in the stores. I could see from the merchandise and the variety of products available — there was clearly a diminution in the skills and the buying in the company. And you could just see as you walked through the stores, in the eyes of the people, that there wasn’t the same level of engagement and passion and love.”
Earlier on Wednesday, during the group’s interim results presentation, Summers said it was a privilege to be back at Pick n Pay.
“I left here physically but I think a little piece of me always remained here in this very special place with these very special people,” he said.
“And it is equally distressing for me, as it is for all of us in this room — the family, Wendy [Pick n Pay co-founder Raymond Ackerman’s wife], the shareholders — to see our beloved Pick n Pay in this situation.”
Summers’s first stint at chief executive is widely associated with Pick n Pay’s glory years, before its rival in Shoprite got its head start. Pick n Pay’s current share price is more or less the same as what it was when Summers left.
According to Summers’s assessment, it could take up to two years to turn Pick n Pay around. “This is a big ship … But we will do it,” he said.
He also suggested that the group might continue to hold onto its dividend, saying that the company needed to show some constraint and make good investments.
Speaking to the M&G, Summers revealed that during his catch-ups with Pick n Pay founder Ackerman over the years, “it became apparent that the labour of his life was losing its lustre”.
Ackerman, who died last month, joked about the pair returning to revitalise Pick n Pay, Summers said.
“When I came back for Raymond’s memorial to say goodbye to the man that I love, Wendy asked me if I would consider coming back and helping Pick n Pay in its current circumstances. And I said, ‘Yes.’ I didn’t have to think long about it.”
Asked whether he felt empowered to do what needed to be done at Pick n Pay, given the Ackerman family’s control of the business, Summers said he has always been left to get on with the job.
“I trust them. They trust me. And we will be in this together. And the same with our non-executive directors. We are going to take this whole business forward together.”
Considering Pick n Pay’s position, it could again become the target of a takeover by a foreign retailer. Commenting on this prospect, Summers noted that at Pick n Pay’s current share price it might seem an attractive proposition.
“But we have to focus on running the company. We cannot worry our little heads with that. It’s perhaps a good thing that the family does have control in these circumstances.”