Pick n Pay Reports US$154M Impairment Amid Projected Full-year Losses

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Pick n Pay, South Africa’s third-largest grocer, has announced a US$154 million impairment as it projects a full-year loss of the same amount due to debt servicing, rising energy costs, and low performance.

The retailer announced that US$98 million of the impairment is for selected loss-making stores that will be closed down or converted to franchises as part of the strategic plan following the loss estimation.

The remaining writedown amount will be for the select outlets expected to remain open.

These losses are attributed to increased debt service costs due to inflation and diesel costs that run generators during power outages.

Early in the year, the company’s new CEO, Sean Summers, announced a two-step plan to reverse its debt costs issues.

The plan involves a rights issue to raise US$218 million and listing its largest subsidiary, Boxer, as part of its internal strategy of repaying the company’s US$331 million debt.

Sean also disclosed a debt restructuring agreement with short-term and long-term lenders to secure the company’s funding and liquidity up to September 2025.

The market reacted favorably to this debt restructuring agreement as share prices increased by 9.4% on the day of its announcement.

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However, the loss per share is expected to average US$0.35 this financial year, compared to earnings of US$0.13 per share in the previous year.

Summers was appointed in August 2023 when the grocer significantly lost market share to rivals like Shoprite amid high inflation and interest rates in a promotional market.

He acknowledged it will be difficult to turn the company’s focus around, but he remains adamant that his past experience working with Pick n Pay and his other managerial stints will be enough to change its fortunes.

Pick N Pay requires a future-proofing strategy as much as it needs strategies to offset the current debt and energy cost challenges. Future-proofing will require implementing interventions that respond to changing market dynamics in the competitive grocery market.

Summers said, “One has to have a fair grip on what retail could evolve into in terms of the combination between your physical store infrastructure, as well as the infrastructure that you are going to need to take care of the online shopping and home delivery portion of the business as well.”