UNDICTATED: Summers’s challenge exposed by Pick n Pay’s “truly awful” results, shares drop 14%

Today Pick n Pay released the last set of pre-Sean Summers financial results, numbers so bad that an already depressed share price promptly dropped another 14%. The group’s 70-year-old CEO, reinstalled two weeks back some 15 years after he retired, suggested the best thing about the numbers is that founder, the late Raymond Ackerman, wasn’t around to see them. But he has a plan, and although it will take time (Summers says 18-24 months before anything profound is evident), far-sighted investors will be encouraged. In this episode of UNDICTATED, SA’s master retailer shares what brought the group so low – and his plan to turn things around. He spoke to BizNews editor Alec Hogg.

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Relevant timestamps from the interview

  • 00:09 – Introductions
  • 01:10 – Sean Summers on if he has changed his business practices since coming back into retail
  • 02:13 – What brought him back to Pick ‘n Pay
  • 08:08 – On what has he changed and learned to bring back to the business
  • 11:41 – How he will address the wave of retrenchment
  • 14:18 – How many outlets has he got
  • 16:25 – How long will it take him and the team to turn Pick ‘n Pay around
  • 18:37 – Feedback from the investment community
  • 20:16 – Expectation of competitors doing anything different
  • 25:34 – Conclusions

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Edited transcript of Alec Hogg’s interview with Sean Summers, CEO of Pick ‘n Pay

Alec Hogg: Pick ‘n Pay released the first set of numbers since the passing of its founder, Raymond Ackerman, and maybe they waited until he had gone because they are awful. There’s a loss in the company of 837 million rand, share price down 14%. But the good news is because of these bad numbers, there’s been a change in the leadership, and the new leader returned to Pick ‘n Pay is Sean Summers. He joins us today.

In this issue of Undictated, we’ll get some context on why a 70-year-old is now the new 50-year-old. Sean, good to see you, man. It really is. It’s a slimmed-down Sean Summers that we see. Have you changed your business practices much from when that beefy guy used to go and embark on hand-to-hand combat in the retail game when you were last running Pick ‘n Pay?

Sean Summers: No, not at all, Alec. The old story in life, the more things change, the more they stay the same. So it’s just fantastic to be back. I think you’re a little bit kind when you say the results were awful. They’re truly awful. Yeah, to a degree Raymond was spared having to see this in the flesh, but he was certainly well aware of the duress that his life’s work was under, as is Wendy.

Alec Hogg: When we have a look back, and I guess this is the most important part, when you left Pick ‘n Pay, the share price was in the mid-35 rand, 30 rands. It’s now in the mid-20 rands. The market cap, the value of the company, was then sitting higher than that of Shoprite. Today it’s 10% of the number one competitor. So by any standards, this is a reversal. Was there any time in those intervening 15 or so years that you thought, “I need to give them a call and go and help”?

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Sean Summers: You know, obviously, I mean, you watch from a distance and you see how things are unfolding. And I mean, obviously, I developed a parallel life. I mean, we moved to London and I got involved in other personal interests and investments and stuff and then, at the time, running around for Steinhoff in the underlying retail businesses. So, I mean, you watch from a distance, obviously, with a great degree of distress at the fact that the company wasn’t keeping pace and they were starting to slide backward. So, yeah, you observe it from a distance. You know, was there ever sort of a clear reach out, let’s get back there? No. But, you know, specifically post-COVID, Raymond and I, we’d have our sort of six-monthly cup of tea and chat and catch up and what have you. And, I mean, it was very clear, and he understood very well that things were not as they should be.

In May, before I returned back to the UK, I spent some time with Raymond and Wendy at home. You know, he used to joke. He used to say, “Sean, we can go back there and get it fixed up.” So I think it was kind of almost like the elephant in the room, you know, and with his passing, I made a commitment to the family. The family asked me if I wouldn’t please return and see if I couldn’t assist, get it back to where it was before, and kind of restore it back to its rightful place in the retail tree.

Alec Hogg: Why did the family wait so long?

Sean Summers: I don’t know, Alec, you would need to ask them that question. But you know, I can only deal with what’s tomorrow. I can’t deal with what is past and regrets and should-haves and could-haves, doesn’t change anything. It’s not going to change anything going forward. So, you know, we have to deal with the hand that we dealt now. And it’s not a pretty hand, as you saw this morning. The irony is, you know, I had somebody send me a WhatsApp very early this morning, saying good luck with the result, but look on the bright side, these numbers are not yours. I said yes, but they will be tomorrow. So, you know, that’s the reality that you accept in this thing. But this is not for the faint-hearted. But therein lies the opportunity, Alec. I mean, we’ve still got really great people. I mean, since I was physically back in the building in the last couple of weeks. You go around and you just talk to the people here. We still got beautiful, wonderful people here who are just looking for a better, brighter future. And we can do that. It’s going to take a while, but we can do it. There’s no reason we can’t do it.

Alec Hogg: So that hand-to-hand combat again.

Sean Summers: 100%, 100%. And you know, we asked a lot of questions. People are like, you know, who are you, 70 years old, what do you know, what have you? You know, the truth is that the more things change, the more they’re the same, as we said in the beginning. And you know, all of these new routes to market, all of these new channels to market. I mean, I remember when I was born in Cape Town in 1953. I don’t remember the event, obviously, but certainly when I got to the age of seven, eight years old, I remember how my mom used to provision the home. She would phone the grocery store on that old, heavy bakelite phone. We had to dial like this. A few hours later, the fellow would arrive at the house on a bicycle with a wicker basket. You put the coupons in the milk bottle at the gate, and that’s how you provision the home. So I mean, what really has changed at the end of the day? So the Internet’s replaced the bakelite, and there’s a WhatsApp scooter or a 6060 scooter that replaces the delivery at home. But I mean, in and of itself, the process hasn’t changed fundamentally. We’re not eating six times a day because of the internet; we’re eating differently. So, you know, the good old fundamental tenets of retail absolutely remain in place. It’s about the product, it’s about the place, and it’s about the people. And if we’re brutally honest with ourselves in Pick ‘n Pay, we have, over the last, certainly a decade more, fallen out of love with the business and the detail and the passion for the business.

And I can say this because I mean I still used to go into the stores and I would go and have a look at what’s in the bakery, what’s in the cheese bar, what’s in the ranges and what have you. You can look at the people, you can look at the pace that people move at in the store. And I suppose the thing that almost irritates me more than anything else, frustrates me more than anything else, is that the playbook that Peter and, you know, post Whitey towards the tail end of Whitey and then Peter at Checkers, and I mean 10 out of 10 to them. They’ve done an excellent job. But they’ve taken our playbook and thrown it back at us. Because all of the stuff that we did in the last part of the ’90s where we completely refurbished the whole of Pick ‘n Pay and we took Pick ‘n Pay on that stellar growth path. I mean, that is all about putting fresh foods on the floor in the stores, opening up all of these beautiful areas, dealing with the house brand ranges and stuff, getting the hearts and minds of the people right, dealing with the atmosphere in the store and stuff. Nothing new, it’s nothing new. So in a way, we’ve kind of aided and abetted their success. We stood quietly behind, not quietly behind the sideline, we stood on the sideline. And perhaps the energies and the efforts of the leadership teams that have been here haven’t been focused enough on retail. And retail is detail, it’s one key, one door, one store. It’s repetitive. It’s every single day, and that’s the very nature of the business.

Alec Hogg: Have you changed or what have you learned in your time away that you can now bring into Pick ‘n Pay?

Sean Summers: I had an extraordinary time away from Pick ‘n Pay. I mean, experiences that I had running all over the world of retail in Steinhoff. So I mean, post my sabbatical that I took and the move to the UK, you know, when I moved at an operational level. And I mean, my role in Steinhoff really at the end of the day was almost sort of like a roving retail person in the actual branches of retail across the globe, you know, from New Zealand to Australia and some of the stuff in Europe, and then the UK and then the USA. It was extraordinary to get involved now to kind of done the whole gamut of retail from furniture to clothing to food to liquor to everything. I don’t think it’s a branch of retail that I haven’t done now. So you certainly learn to hone your skills as a retailer. It was a bit scary when I first arrived there because you’ve got all of this image of, you know, this, for whatever you’ve got this reputation that travels in front of you. And then you go and visit a furniture store and send me something and you walk around at the management team and they’re all waiting for these pearls of wisdom at the end and you’re a little bit lost. It’s exactly what you’re gonna say to them. But then with time, as you sort of scratch into the business, you realise that it doesn’t matter what branch of retail you’re in, the basic fundamental principles always remain the same. Always remain the same. And the main thing is people. People make…

Alec Hogg: Retail is tough, Sean. People are on their feet all day. It’s not an easy game. And if you’ve had these waves and waves of retrenchment, how do you start to address that? Do you freeze retrenchments?

Sean Summers: I mean, we’ve done it, so we don’t need any more retrenchments. And you know, expenses, you know, Alec, it’s kind of, you look at the expenses in the business philosophically, you know, I look at expenses almost like the tail and the dog. And then, you know, business, they get a little bit under your rest, and then you start cutting the tail and cutting the tail. Well, you know, eventually, you end up, there’s no tail left to cut. So I’m like, well, maybe the problem’s not the tail, the problem’s the dog. How about we go and get a bigger dog? And… It’s momentum. I don’t care what business you’re in. Momentum is your friend. And as long as the momentum is maintained in the business, you can do all of the good things that a corporation needs to do to keep growing, to keep on looking at the heart of the business, to keep on looking at the spirit of the business. But I think philosophically, when it comes to momentum, you need to understand in your mind’s eye that even when you’re really successful and you’re really cruising along.

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There’s no such thing as perpetual motion. So you always need to say to yourself, no matter how successful I am, my rig is going uphill and I continually need to put diesel in the tank. But companies get complacent and they say, well, things are going well, we can cut back in this, we can cut back in that, we can distribute a bit more to the shareholders and stuff. They stop doing the stuff that they should be doing. They stop investing in stores. They take a little bit more off the table. And then all of a sudden, this thing starts to slow down and then it gets to that horrible lurching point where it hangs and then it starts to run back on the hill. And you know when that happens, there is no cost cutting that you can do that’s gonna save you. You cannot save your way to prosperity. You cannot cut costs to prosperity. Okay, you’ve gotta confront the beast for what it is, you’ve gotta get out there and you have to go and trade your way to prosperity. One of the things I’ve been saying here in the little bit that I’ve been here, you know, I use the Stevens principle in that famous Cambridge Oxford boat race, and you know, they were just focused on one thing, what makes the boat go faster. And that’s what you have to focus on when you’re in this situation. It’s just a simple, simple notion, simple philosophy. We only do what makes the boat go faster. We have got no time. I’ve got no time to worry about what Peter and the other opposition, the SPAR, or anybody else is doing, our focus is simply internal, what makes our boat go faster.

Alec Hogg: How many athletes have you got? How many people have you got? I’m trying to quantify the scale of this challenge.

Sean Summers: Well, we’ve got across the group, if you look at it, we’ve got about 90,000 people in total employed across the group. But those employed in all of the various columns, I mean, you’ve got Boxer out there, we’ve got franchises of business as well. So I mean, directly, most probably in the core company-owned random piece of business, is most of you circling away in excess of 30,000 associates that you have to look for. These are people that have families, they’ve got extended families and what have you. So the entire Pick ‘n Pay Corporation, there are a lot of people involved here. So there’s a huge responsibility to ensure that these people have a future, that they have jobs, that they continue to do what they do. So when you look at the business currently, there’s elements of the business that are doing absolutely amazingly, and we’ve just got this challenging piece of Pick ‘n Pay on it, problematic, but I mean we’ve been here before, Alec. I mean, ’95, ’96, when you were around, I mean Pick ‘n Pay, you know, post when we had the whole Halcyon era and Mandela and the whole new world and what have you, the first major strike we had was Pick ‘n Pay, and the company wasn’t in great shape then. And we had to embark upon a whole process of winning the hearts and minds in the company, of getting the things sorted out, and then getting all of the stores cleaned up. But you know, these processes are profound, and they take time, and that’s why we’re here today because I mean I always believed in one thing, the truth sets you free in life. You know when you start telling porky pies, you’ve always got to think about what you’re going to say. The truth will set you free. And that’s why we said no, we’re telling the market flat out. This is what it is. This is what the result looks like. It’s bloody ugly. It’s not going to get better for a while. So you’re either in for the journey, okay, or you must make some other elections. So we see that sadly, you know, one or two have made that election to go elsewhere, and those that are going to stick the journey with us, I certainly believe they will reap the reward.

Alec Hogg: How long is that journey that you’re talking about now? How long do you think it will take you and your team to turn Pick ‘n Pay around?

Sean Summers: I would say reasonably, Alec, this is a multi-year program, but this is not hanging around for two, three, four years. It’s not that at all. It needs to turn quicker than that, but one needs to have realistic expectations and time horizons. So I would say 18 to 24 months until you see really profound, proper moves going solidly, solidly in the right direction. There are gonna be early indications for sure. I mean, we’re gonna get around the company, talk to the people, I’m gonna be face to face with all of this stuff. We’re going to have a look at our structures, our command and control structure, how we’re actually running the organisation, all of that stuff. So there’ll be some small things in the beginning, but it’s an 18 to 24-month program.

Alec Hogg: You know, Mark Lamberti in 2014, when he became the chief executive of Imperial, he was 64 years old. There was a lot of comment at the time. You’re six years older now. Okay, it’s 10 years older. And of course, you get, we supposedly much younger than we were. But one of the things he did was he shared a hundred-day plan that he had put together. Are you one of those people? Do you put together a hundred-day, two-year, five-year plans?

Sean Summers: No, I mean, there’s certainly, and I mean, it’s too early for that anyway, Alec. I mean, if I had to come and put on a 100-day plan, we’ll show you a PowerPoint presentation of what things are gonna look like, you’d say, hmm, I wonder who put this together for him. So I certainly absolutely have a plan of how we’re going to tackle this and what we’re gonna do, that is for sure. But I mean, it’s not clear. It’s just saying, you know, here’s a 100-day plan, boom. But we are busy at the moment putting together what are the basic fundamentals of retail. You know, I don’t, I mean, I know what to do. I know what to do. We just got to get it done.

Alec Hogg: And the feedback that you’ve had from the investment community, I must tell you, you’ve taken me out of the fantasy fund manager competition, because when you’re appointed, pick and pay was in my portfolio. Whoa, another 14% down today. I’m out of the running. Not that I was really in the running anyway, but I think there are a lot of people who were, who I suppose maybe had unrealistic expectations and some who still would.

Sean Summers: 100%, and that’s why today we said listen we need to have realistic expectations over here and I mean you come back I mean, you know we’ll say behind every successful person is a confused partner because our partners know they really know who we are I mean they’re joking me I mean you arrive back in this thing there’s this enormous pressure of expectation but I mean let’s be honest. Because Sean Summers is back here at Pick ‘n Pay, Mrs. Blignout in Zanin is not going to buy more at Pick ‘n Pay tomorrow. Okay? It’s not happening. So just be realistic about it. And that’s why I said this is a journey. You’ve got to take the people along with you on the journey. So this is not about a short-term, little speculative thing. You know, this is a bump. And said last week when we were talking, when I was speaking to all of our associates around here and preparing for this week’s announcements and what have you, I said, guys, just relax. Don’t worry about the noise. There’ll be a lot of noise next week. There’s gonna be a lot of chatter. The share price may take a little bit of a bump. Okay? Don’t worry about it. I said in a year’s time, two years’ time, three years’ time, and what have you, who cares what the share price was on this day three years ago? It’s done. So, I’m not driven by the share price today. Okay? I’m driven by what we’re gonna do with this company that’s gonna ensure that the share price is in the right place in a year’s time, in two years time, in three years time, because that’s what’s important. So for short-term speculative people, wrong place.

Alec Hogg: Are you expecting that your competitors are going to do anything different now that you’re at Pick ‘n Pay?

Sean Summers: I mean listen, I have no doubt that our competitors have been working out how they can prepare a nice welcome mat, and that’s the reality of life. Don’t worry me. When I say it doesn’t worry me, I’m not being cocky or angry or anything like it. When I say it doesn’t worry me, there’s nothing I can do about that. So if I spent a second of my day worrying about what my competitors are preparing for me, I’ll be putting my energy in the wrong place. I’ve got to put all of my attention back into the company, I’ve got it fulfilled. You know, on the first day, and I mean, there’s a little bit of a change in the world that I was here, because when I left here 15 years ago, there wasn’t WhatsApp. But I mean, I received nearly 400 WhatsApps on day one. Nearly 400 WhatsApps. Every single one of them, positive. Every single one of them saying, flip, it’s amazing. We want our pick and payback from suppliers, from the market, from analysts. And it’s just been extraordinary. And the volume of that has not dissipated. Because here’s the thing for us in pick and pay. We need to play to our strengths, and we need to realize that for a lot of people out there in this country, they still love pick and pay. But they feel a bit jilted.

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They feel that we’ve let them down, and we have let them down. So unless you’re honest, and you can go down and bend it, and say, listen, I’m sorry, I’m gonna make it right, okay? That’s where we are currently at the moment. So we’ve made our apologies. We’ve told the market, we’re sorry, we haven’t got this thing right over the last decade. We’re going to fix it. And we’re going to get there. And we’re gonna get there through the people, then we’re gonna get there through the product, the range, the merchandise and what have you. We’re gonna look at the stores. We’re gonna look at the strategy that’s been put in place over here. And you know, on the day that this happened and there was a change of leadership here, and I phoned Peter, and we had a long discussion on the telephone because I also feel for people, and Peter was a good guy. He was a nice chap, and you know, I said to Peter that as far as this Ekuseni plan and a lot of the investors have been saying to us, but everything has been about Equuseni and Pick ‘n Pay.

And I said Peter, you know, part of the problem with this process and the learning out of this is that when you do a multi-faceted change process in the company that consists of four or five columns of things that you’re undertaking. If you put a banner, a slogan, or a war cry, or a chant across the top, the two that are maybe a little bit challenged then bring the whole thing into question. So I said what we need to do is we need to remove that war cry off the top. We then need to deal with the columns and the constituent components and have a look. So I mean Boxer is just the most extraordinary business. And I mean, I remember back to when we bought Boxer, and I hounded Pat Goss and Hugh Bland, who was the then MD then, you know, chased them down for about a year to get them to convince them to sell us the business. And I mean, Boxer has just been extraordinary and continues to grow fantastically. So I mean, Marek and his team there are just shooting the lights out. And that’s in a market where their customers are really under duress. So if you talk about the reality of the effect on inflation. And I mean, we know that our poorer communities have even less capacity to grow their disposable funds that they have in line with inflation. So Boxer has been under duress. But notwithstanding that, it’s shown phenomenal growth, doing fantastically well. They’re a bit behind the curve on store openings. You can understand it because the biggest problem there is that Boxer still has to deal with the regulatory environment wherever they are. So the local councils and the local municipalities and stuff, getting planning applications, rezoning through all of that stuff. They’re challenged with that as well. So it’s pushed a bit back into next year for Boxer. So Boxer will have a phenomenal opening next year. You know, Hazel Pellet and the clothing team, I mean, Pick’n Pay clothing is really, really remarkable. And I’ve had people who I know in the clothing industry that have been commenting to me already for quite a while about the phenomenal success of Pick’n Pay clothing. So that’s really been very, very good for us.

You know, the whole value-added services business and the banking side, that’s been growing incredibly fast as well. ASAP and the virtual online thing, and as I say, consumer promiscuity today, you know, customers have the physical and the virtual relationship with us. So on the virtual side of the business, irritating thing then. We were the first ones to start home delivery, and that when I was still here. But somebody else has done a slightly better job of executing that than we have. But we’re catching up there again. We’ve got a great team in place there. Two really smart guys that started out with bottles who really understand that business. So we’re gonna make progress over there. And then we come down to the two challenge columns within this broader Ekuseni banner, which comes back to the heartland of Pick’n Pay, the thing with Pick’n Pay written on it.

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