40 of 2023

Newsletter No 40/13 October 2023                              

                  

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Blood, toil, tears and sweat

by Chris Gilmour

Sean Summers has returned as Pick n Pay’s CEO. Picture: supplied

Returning CEO Sean Summers faces a daunting task rescuing Pick n Pay — and speed is of the essence

The big news in SA retail last week was Sean Summers’ return to Pick n Pay as CEO, which coincided with an appalling trading update that sent the market into shock and the retailer’s shares plunging 14% on the day. The good news associated with Summers’ return appeared to be lost or ignored by the market, which has now taken an especially dismal view of Pick n Pay’s outlook.

To be honest I was equally pessimistic about the group’s prospects before learning of Summers’ return, but I firmly believe he will be able to reinject energy, direction and a sense of purpose into the ailing, iconic retailer. It won’t be easy, though; Shoprite is the clear martlet leader and won’t give an inch willingly to any competitor.

Looking at the situation completely dispassionately and over-simplistically, one could come to the conclusion that Shoprite has got to the top by a relentless focus on execution and just getting on with the job; for example, focusing on world-class centralised distribution and giving the customer the right products at the right time at the right price.

Twenty years ago, Pick n Pay was doing that successfully too. The group’s turnover was similar to that of Shoprite, as was its operating margin. But since Summers’ departure in 2007 it has largely fallen apart — with the exception of the discounter Boxer brand and Pick n Pay clothing.

Summers now has the unenviable task of trying to fix the beleaguered core supermarket business while also attempting to recoup market share that has been lost to Shoprite/Checkers and others over the years. It’s a seemingly impossible task and can explain why the market took such a dim view of the trading update. Regardless of the many exceptional items mentioned in the update, there are profound fundamental problems that need to be fixed urgently. An added complication for Summers is the relatively short time frame that confronts him.

But he does have a number of advantages. First, he is a born trader. There have been precious few like him in SA or anywhere else for that matter. In common with former Shoprite CEO Whitey Basson, current CEO Pieter Engelbrecht, Dis-Chem’s former CEO Ivan Saltzman, the late Metcash founder Lionel Katz and, of course, the late Raymond Ackerman, Summers has retailing in his blood. He thrives on the cut and thrust of all things to do with consumer sovereignty. But he’s also immensely charismatic and gets the best out of his people. For a guy of 70, he has incredible energy but his stamina will be tested daily for the next couple of years at least.

For the rest of the staff at Pick n Pay, Summers’ return is precisely the tonic required. Even younger staff members who weren’t at the company during his first stint  won’t fail to be enthused by the new energy that he will undoubtedly bring to the business.

But there’s a sting in the tail. This is without doubt the last roll of the dice for Pick n Pay. If Summers can’t get it right and in a relatively short time, then it’s all over bar the shouting. Over the years, top management from the UK and Europe has been brought in to try to get Pick n Pay right, but apart from some success in cost cutting by Richard Brasher several years ago, there was not much else to write home about.

The task that confronts Summers is daunting. As Winston Churchill told his war cabinet in May 1940, “I have nothing to offer you but blood, toil, tears and sweat”, Summers could equally tell this to his staff as they embark into further hand-to-hand combat (metaphorically speaking, of course) with the competition.   

• Gilmour is an investment analyst.

We love beads

By Gary Cotterell

Bring a flash of personal style to a watch collection with this colourful hand-beaded watch strap by award-winning Cape Town-based Unyazi Designs

An award-winning Langa-based Unyazi ‘lightning’ Designs, Umuzi’ (‘a village’ in isiZulu), hand-beaded watch strap.
Image: Supplied

This colourful ‘Umuzi’ (‘a village’ in isiZulu) watch strap was hand-beaded by award-winning Langa-based Unyazi ‘lightning’ Designs, bringing a flash of personal style to a watch collection, including Apple Watch. This strap updates a vintage Seiko 5, coincidently featuring the Japanese brand’s ‘Daini’ lightning bolt on its dial. Inspired by Zulu love letters and “timeless African stories”, straps are made with top-quality Czech seed beads, each colour conveying a different message. Available in numerous patterns and widths, and customisable on request, they’re a welcome touch of local flavour on the wrist.   

Savanna x Wanda Lephoto ‘Dry Goods’ Waterproof Apparel raises R200 000 for GreenUp

By Thato Moloi

In March this year, Savanna Premium Cider partnered with local fashion superstar Wanda Lephoto to introduce some dryness to an ever-wetter world, a limited-edition fashion collection of Savanna ‘Dry Goods,’ waterproof apparel for a world underwater, available for sale to persons over the age of 18.

This premium, sustainably produced range went beyond the aesthetics of ‘cool’ and made a meaningful statement about sustainability by creating awareness of the inevitability of climate change. As the ultimate dry brand, it only makes sense that Savanna would bring you a clothing range that would allow you to stay dripping and dry in a world of rising sea levels, melting icebergs, and unpredictable weather.

All the profits from the ‘Dry Goods’ premium waterproof apparel range collaboration between Savanna and Wanda Lephoto were donated to GreenUp, a leading organisation focused on the circular economy, environmental education, and community resilience. The donation handover occurred on 29 September at Disoufeng Pub & Restaurant, a Savanna Lighthouse Outlet in Soweto. The GreenUp partners, Heineken Beverages stakeholders, media, and friends of the brand were in attendance.

Rex True final results June 2023

Revenue from continuing operations rose 35.1% to R899.3 million (R665.7 million) whilst gross profit grew 8.2% to R354.4 million (R327.7 million). Operating profit shot up 61.0% to R139.6 million (R86.7 million). Profit from continuing operation attributable to equity holder jumped to R85.7 million (R59.5 million). Furthermore, headline earnings per share went up 52.2% to 399.4cps (262.5cps).

Company outlook

The current economic outlook presents both challenges and opportunities. The issues facing the economy, including high inflation and interest rates, a rising cost of living, an energy crisis, and low economic growth forecasts, will require careful navigation in the coming months. Managing risks and sustaining profitability remain key elements of the companys strategy in this volatile climate.

The group is seeking to ensure that operating segments have resilient financials and a competitive advantage in their respective industries. In response to the widespread energy crisis, the group is investing in alternative energy sources in order to reduce the current and future adverse impact on operations and profitability.

Notwithstanding these challenges, we remain positive, and shall continue to utilise our skills and expertise to optimise the current portfolio of businesses and actively seek opportunities to diversify the group. In doing so, the company can position itself for long-term success

How big is the clothing market in South Africa?

Revenue in the Apparel market amounts to US$5.79bn in 2023. The market is expected to grow annually by 4.43% (CAGR 2023-2028).

 

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