Pick n Pay yesterday said it was “engaging landlords on opportunities to redress store layout deficiencies, address critical repairs and undertake maintenance work” at stores which have been deferred. Photo: Armand Hough/Independent Newspapers.
Troubled retailer, Pick n Pay, is resetting its stores and renegotiating its leases to come up with fewer but better outlets that are expected to deliver value and profits post the retailer’s R4 billion rights offer.
Pick n Pay is undertaking the rights offer, in addition to the unbundling and separate listing of Boxer, to raise capital to pay off its debts and invest further into its operations.
The rights offer, underwritten by South African lenders Standard Bank, RMB and Absa, opens next week and closes at the beginning of next month.
Apart from the capital raise, Pick n Pay is resetting its stores.
The company yesterday said it was “engaging landlords on opportunities to redress store layout deficiencies, address critical repairs, and undertake maintenance work” which had been deferred.
“These discussions include store resizing that aims to hand back inefficient space in certain centres that have the potential to become line shops or used for other purposes,” said Pick n Pay in its rights offer circular.
After this exercise, Pick n Pay will seek to improve the performance of its stores through “price and promotions, (improved) customer service, product range, and hypermarkets” offerings.
This feeds into the company’s substantial focus on its store estate footprint. Under this reset, Pick n Pay has undertaken a comprehensive store by-store review.
“This review has informed the group’s renewed estate reset plan, which places most emphasis on stores that have made losses over a multi-year period,” said Pick n Pay.
“Moving forward, the Group’s focus for Pick n Pay will not be on ‘scale-at-all-cost’, but rather on a smaller but more profitable business, with fewer but better stores.”
Under the process, the South African grocer will place more emphasis on differentiating its hypermarket offering from its supermarket offering, in a bid to attract more footfall and enhance the appeal of hypermarkets as destination shopping journeys.
The company is targeting a reduction of “excess space across its hypermarkets estate without impacting sales” while it pursues opportunities “to improve sales densities and reduce store” costs.
There will also be greater emphasis on promotions, bulk-buy opportunities and various events at the hypermarket outlets.
Moreover, the company is also resetting the hypermarket general merchandise range reset as it strengthens regional buying with a focus on volume and economies of scale.
Enhanced focus and emphasis on fresh and food services such as coffee, lunch, and grab and-go offerings will also help to drive frequent visits by shoppers to the company’s outlets.
It noted that several factors had contributed to a decline in its store profitability over the years. These included a decline in customers as newer shopping centres opened up elsewhere in addition to shifting market trends.
Under-investment in shopping centres by landlords had also brought about a decline in footfall. Worse still, the company’s competitors, including Shoprite, had undertaken more store openings.
“The Group’s internal benchmarks have demonstrated that Pick n Pay franchisees achieve greater trading density and sales per store compared to a typical corporate-owned store. This is driven by the franchisee’s greater focus on in-store operations and customer service,” it said.
As part of the redesign of Pick n Pay’s leadership structure, the company’s South African retail business has been divided into six trading regions from the previous three.
The shift is “intended to strengthen regional leadership, with regional experts being given greater capacity to tailor Pick n Pay’s offering according to their local knowledge, thereby enhancing autonomy, accountability” and effectiveness.
“The redesign also embeds regional buying teams in the local market to deepen relationships with, and ensure the careful selection of, vendors across the key product categories,” it said.
“The Group’s aim is to drive like-for-like sales via a local team with understanding of local conditions and consumer preferences, and with the required level of focus.”
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