Pick n Pay Faces Challenges in Franchise Supermarket Sector
Pick n Pay has disclosed the challenges faced by its franchise supermarket division, reporting a 0.8% decline in sales for the 21 weeks ending 21 July. This performance has been labelled as “disappointing.”
However, this decline must be viewed in the context of an internal selling price inflation of 4.7%, indicating a 5.5% drop in volumes through its franchise supermarkets compared to the same period last year.
In contrast, the company's owned supermarkets (including hypermarkets) experienced a 3.6% sales growth, excluding standalone clothing outlets.
This improvement is attributed to “improved retail disciplines,” which have driven a significant turnaround from a -0.5% performance in the second half of the previous financial year to a 3.6% growth in the first half of FY25.
Notably, Pick n Pay Hypermarkets have returned to positive sales growth after a prolonged period of underperformance.
Pick n Pay Faces Challenges in Franchise Supermarket Sector
The group's reporting granularity has also improved, with Boxer’s revenue and sales growth being disclosed separately since the 2023 financial year under former CEO Pieter Boone.
With the impending separate listing of Boxer later this year, its margins and profitability are now public.
The separate disclosure of the franchise unit's performance is expected, as CEO Sean Summers and the group aim to demonstrate the ongoing turnaround of its supermarket business.
Each business unit faces unique dynamics and trajectories. The group highlights that “company-owned supermarkets have rarely outperformed franchise supermarkets in recent years.”
While this trend reversal is seen as early progress in the turnaround of company-owned supermarkets, revitalising the performance of franchise stores remains a key priority.
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The franchise unit is substantial, with approximately 250 supermarkets across South Africa, compared to around 300 company-owned supermarkets.
