Overview

Pick n Pay Stores Limited, established in 1967 by Raymond Ackerman, is a prominent retail chain in South Africa. The company operates over 2,200 stores across eight African countries, including South Africa, Namibia, Botswana, Zambia, Nigeria, Eswatini, and Lesotho. Its operations are divided into three main brands: Pick n Pay, Boxer, and TM Supermarkets. In the fiscal year ending in 2023, Pick n Pay reported a revenue of R106.6 billion, an operating income of R1.68 billion, and a net income of R1.17 billion. The company employs approximately 90,000 individuals. 

In recent developments, Pick n Pay has been implementing a turnaround and recapitalization strategy to address challenges in its core supermarket business. This includes the initial public offering (IPO) of its discount grocery chain, Boxer, on the Johannesburg Stock Exchange. The IPO raised R8.5 billion ($471 million), with Pick n Pay retaining a 65.6% stake in Boxer. Boxer operates over 500 stores and holds a 68% market share in the discount grocery sector in South Africa and Eswatini. reuters.com

Despite these initiatives, Pick n Pay reported a wider half-year loss for the 26 weeks ending August 25, 2024, with a pre-tax loss of R1.1 billion, compared to R837.2 million in the previous year. The company attributed this to trading losses in its core grocery business and increased borrowing costs. However, segments such as clothing and online sales demonstrated solid momentum, and company-owned supermarkets showed improved performance. The discount Boxer segment also reported a 16% increase in trading profit, driven by a 12% growth in sales

In light of the this performamnce, Pick n Pay, has announced the closure of multiple underperforming stores as part of a strategic effort to address the financial losses and strengthen its market position. This move reflects both internal operational challenges and broader economic trends affecting retail in South Africa and the African continent

The closures are primarily driven by financial losses. For the fiscal year ending February 2024, Pick n Pay reported a R3.2 billion after-tax loss, with its core grocery segment suffering a R1.5 billion trading loss. In contrast, the Boxer division generated R1.9 billion in profit, highlighting a clear shift in consumer spending toward discount retail. In response, Pick n Pay has launched a ‘Store Estate Reset’ strategy aimed at: 1)Closing loss-making stores; 2) Converting select stores into franchises; 3) Expanding Boxer’s footprint to capitalize on its strong performance

As part of the restructuring, 32 supermarkets have shut down, including 24 company-owned stores, 8 franchise stores, Additionally, five company-owned stores were converted into franchises. While Pick n Pay has not disclosed an official list of affected locations, the closures span across various regions in South Africa, targeting stores that have consistently underperformed.

While the decision comes amid economic challenges, changing consumer behavior, and intensified competition from retail giants like Shoprite. But what does this mean for the economy, consumers, and the broader African business landscape? Watch this insightful YouTube video by Tariro

Competitive Advantage and Market Positioning

Pick n Pay’s shift toward Boxer stores is a clear response to changing consumer spending habits. Boxer, a discount retailer, has demonstrated resilience and growth, with a 12% increase in sales and a 16% rise in trading profit. This shift positions Pick n Pay as a stronger competitor against industry leader Shoprite, which has gained market share by focusing on affordability and supply chain efficiency.Furthermore, franchising allows Pick n Pay to maintain brand presence while reducing operational risks. By franchising stores, the company shifts financial burdens—such as rent, wages, and utilities—to independent store owners while still benefiting from supply chain revenues.

Economic Impact of Store Closures

While the closure of a Pick n Pay store is a strategic decision aimed at improving overall business performance, it carries the following significant economic, social, and operational implications that must be carefully managed to ensure long-term sustainability and minimal disruption to stakeholders.

Job Market Disruptions – Store closures naturally lead to job losses, affecting employees and local communities. However, the conversion of company-owned stores into franchises or Boxer outlets may preserve some jobs in the long run.

Local Economic Shifts – Towns and neighborhoods that relied on Pick n Pay stores for goods and employment could experience short-term economic downturns. However, the expansion of Boxer—known for affordability—could offer a more sustainable model for price-conscious consumers.

A Necessary Evil in Retail

Pick n Pay’s decision to close stores is not a sign of failure—it is a strategic realignment. The company is adjusting to market realities, focusing on low-cost retailing through Boxer, and embracing franchising to reduce risks.

For African businesses, the key takeaway is clear: success in uncertain markets requires agility, a cost-conscious strategy, and a strong understanding of consumer behavior. Pick n Pay’s transformation underscores the need for businesses to adapt quickly, optimize operations, and prioritize efficiency in Africa’s challenging but promising economic landscape.