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Pick n Pay has revealed the extent of the struggles in its franchise supermarket business, with sales down by 0.8 percent in the 21 weeks ending 21 July. It describes this performance as “disappointing”.
However, it needs to be seen in the context of internal selling price inflation of 4.7 percent, which means volumes through its franchise supermarkets were down by 5.5 percent versus last year over the March to July period.
The struggles across its franchisee base compare with sales growth of 3.6 percent across its company-owned supermarkets (and hypermarkets), excluding standalone clothing outlets.
It says “improved retail disciplines” has meant a strong turnaround from -0.5 percent in the second half of its previous financial year to the 3.6 percent level for the bulk of the first half of FY25.
It adds: “The return of Pick n Pay Hypermarkets to positive sales growth after a sustained period of under performance is particularly noteworthy.”
Unboxing Boxer
The granularity of the group’s reporting has improved in recent years, with the disclosure of Boxer’s revenue (and sales growth) separately from the 2023 financial year under former CEO Pieter Boone.
With the (forced) decision to list Boxer separately later this year, its margins and profitability are now public.
The separate disclosure of the franchise unit’s performance is not surprising as CEO Sean Summers and the group have to show that the turnaround of its supermarket business is underway.
Each of these units is facing its own dynamics and trajectories.
The group highlights that “company-owned supermarkets have rarely outperformed franchise supermarkets over recent years”.
“While [it] views this trend reversal as further confirmation of early progress in the turnaround of company-owned supermarkets, revitalising the performance of the franchise stores is a key current priority.”
Its franchise unit is a sizeable business, with roughly 250 supermarkets across South Africa, versus the roughly 300 company-owned supermarkets. – Moneyweb
Online Reporter