Alec Hogg (00:00) Pick n Pay's losses are narrowing. The union war appears to be over, and a successor has been found to come in for the man who was given the job of turning around a company that really, at one point, was right on the brink. But the supermarket still lost R516 million in the six months to the end of August. And the date for break-even? Well, that's been postponed twice. It's now looking at the financial year of 2029.

Chief executive Sean Summers joins us. Hey Sean, we missed you at the BizNews Conference, but at the time there were very sensitive discussions going on with labour, so I fully understand duty called. But it was this week that you've now withdrawn what is called a Section 189A. You've got to explain to us what that's all about, and why it was withdrawn.

Sean Summers (00:57) Yeah. Good day, Alec, and thank you again for your interest in Pick n Pay. We deeply appreciate it, and those of you viewers.

Initially, Alec, you know, when I returned some three years ago now, our labour cost structure was something that was completely out of kilter with the marketplace. We had tried incessantly to engage on a constructive basis with our organised labour movement. And we were left with no alternative at the end other than to issue the 189 process some five months ago now. And it wasn't a case of an idle threat, because if we'd had to go through with it, we would have gone through with it.

But our single goal at the start of it was not to have any retrenchments take place in the organisation, along the journey of achieving what we had to achieve: finding a remedy for a lot of the imbalance that had crept in over a decade of negotiations. We gave quite a lot of extensions in between, because we were gradually finding each other. And I think that it's always better just to negotiate out of the public spotlight, you know, do it at home, do it quietly under the covers.

And we were very pleased last week to sign our agreement with the union, which put us in a situation then that we could really lift the Section 189. And the fantastic thing that that does is that for all of our people in the company, it gives them security. And especially going into the festive period now, it removes that dread thought...

Alec Hogg (02:34) Especially.

Sean Summers (02:40) ...that some of them may have had to be retrenched, had we not achieved what we wanted to achieve.

Alec Hogg (02:45) So for those who haven't lived with labour legislation like you, what is 189? What's the relevance of it?

Sean Summers (02:51) Section 189 really simply says that if in an organisation you are contemplating retrenchments due to the needs and necessities of the business, you are in fact legally obliged to issue a 189, which informs the workforce that there is potential for retrenchments. And what the 189 does is it actually requires of you to find alternatives to retrenchment.

And everybody gets very emotive with this thing, and they all jump all over it. And then you have people write, whoever it is, whatever position they come from, you know, they write a story to suit their headline. But in the simplest of terms, Alec, that is what it is. You're legally required to trigger a 189 and then to work actively at finding solutions to the problem.

I also want to thank as well, Alec, and very, very importantly in this regard, the CCMA, because we had the CCMA involved in the process as well. And the CCMA played a great role quietly in the background, just keeping the parties on track and keeping us focused.

Alec Hogg (03:50) Now, we know that what you inherited at Pick n Pay was not going to be an easy fix: overstaffed, too many stores and so on, and a lot of that relates to labour. The figure I calculate for your annual labour bill is around R6.5 billion. I'm sure you've disclosed it. Is that close to the right number?

Sean Summers (04:11) Yeah, you're not far off, Alec. And in terms of what we have negotiated and settled with the union, we're also not going to be divulging the absolute detail of that, because, you know, this is a confidential settlement between us and the union. They will continue to negotiate with various other structures and organisations that they deal with. But the amount of money is significant. But it is not the only thing that we need to achieve to get the turnaround in place.

You know, momentum is always your friend in business, and we can certainly do with continued momentum in the marketplace. The thing that did bedevil us a little bit... we always talk about the black swan event. You know, we never thought we were going to get the orange swan that was going to intervene, with the outbreak of war in the Middle East. But, you know, the impact of that and what that's done, we can see with the oil prices where they are, and the effect that it's had on the market.

The consumers in this country are really, really, really stretched at the moment. So it is a really tough marketplace, and you can see that when you have a look across the length and breadth of retail. So momentum on the top line is really what will get Pick n Pay there at the end of the day. And what pleases me is that when I have a look at our like-for-like growth, the fact that we are growing our like-for-like sales ahead of all of our competitors shows me that Pick n Pay is now finding favour with the consumer again. And we can see in our own growth vectors that we're starting to get traction.

Alec Hogg (05:45) When I spoke to Marek, Marek Masojada from Boxer, he said that it gets really tough around the middle of the month, that the consumer pretty much runs out of money, and then social grants and other things come in. Now, Pick n Pay works at a higher income level than Boxer. Are you saying the same thing?

Sean Summers (06:08) Well, certainly, Alec. I mean, there's still a good portion of the market where we do have customers that still get grants. And sadly there are too many people in this country that are in the grant system. You know, thank heavens on one side, because it's keeping them alive, but we know that sustainability and affordability are another issue. So we still have some of that within Pick n Pay.

But, you know, people in general are just stretched, Alec. Your non-discretionary income that goes out: people have to pay for the petrol to get their kids to school, pick them up, get to work, do all of the normal exigencies of life. And you can just speak to anybody, driving around, talking to people and what have you. People are under the cosh in South Africa. Fuel prices are ridiculous, electricity prices are crazy. It's crazy. And you look at a lot of your fixed expenditure items, you look at rents: rents are at sort of 5% to 6% escalations. So you've got a lot of these things putting a lot of pressure on business across the length and breadth of the country.

Alec Hogg (07:08) Just before we get off the whole labour story, the Minister of Labour even got involved. What was that?

Sean Summers (07:16) Yeah, Alec, there was an attempt by the minister to get involved, and there was a court case. In fact, there were two court cases. There was one in the Labour Court and also at the CCMA. And in fact, both those cases were lost by the minister and the union. In fact, the minister's evidence was struck from the roll in a scathing judgment.

But we never focused on that. For me, the most important thing was our people in the company, our organised labour union in the company. It's very, very important, Alec. Philosophically, you want organised labour. You don't want disorganised labour. But what has happened is that there is now a serious understanding amongst our labour force in Pick n Pay of just how serious this is. Otherwise the concessions that have been made would not have been made, and there are some significant concessions that have been made. So, you know, we just move on now. Now it's about focusing on the business, it's about running the business, and it's about getting into the festive period, which we hope is going to be a favourable one, but in a very tough market.

Alec Hogg (08:29) Now, I ask that because I had a talk over the weekend with the Minister of Finance, and I must say it's been a long time since I've felt as uplifted by the philosophy, if you like, that is now coming through. For instance, he said that there was a lot of discussion on the oil and gas reserves offshore of South Africa, and that there's a realisation that we've got Rolls-Royce environmental laws, so they've been sterilised. They need to be addressed. And it's something that's occupying the minds in Pretoria.

Then he spoke about mining, and how mining has had a similar issue, that it's also been sterilised in this country. No one's exploring because of laws, which are being addressed. So I almost get the feeling that things are happening in Pretoria. But when you see the involvement of the Minister of Labour in a business like yours, which really is struggling, I guess you have to look at it twice.

Sean Summers (09:00) Yep. And I think the fact that all of the evidence was summarily dismissed was a big shock for our organised labour movement, because they had a look at it and then they realised, wow, you know, this is now being taken on seriously, head on, by the courts. They've stood in judgment of the affidavits that were submitted, and it was summarily dismissed. In fact, it was struck from the roll. And I think that that in and of itself was also one of the trigger points that brought a degree of seriousness into the room.

And, you know, we never said anything about it. I said to my colleagues and the negotiating team at the time, I said, guys, we just keep quiet. We're not going to dance on roofs or do anything like that. We'll just discreetly be quiet about it. Let's just stay focused on the prize here, and let's just keep on doing what we do.

Alec Hogg (10:15) Okay, so that's one big issue now off the table, you're working as a unified front. I was a bit confused, though, about the targets, and why the break-even has been moved out to 2027, 2028, now 2029.

Sean Summers (10:31) Yeah. You know, I think in a way it's easy, but not so easy, to understand. You know, complex situations like this are never linear, so to speak. And it stands to good logic that from your perspective, and from the market perspective, and from most of the journals that come from a financial background, their measure of success is purely the losses reducing and moving to profit. That's the only sort of benchmark hurdle that they have.

But what you have to understand is that until you solve for the company, the consumers, the consumer experience, and the business comes back into the company, you're not going to get the positive outflows of what happens in that regard. You can't wish for profit first and then sales second. It doesn't work like that. So you have to start at the beginning by rebuilding that momentum back into a business. And in a business that had been going backwards for so long, good Lord, you underestimate the degree to which things do actually degenerate, for lack of a better word.

And that's why I'm confident now, when I look at the team that's growing, when I have a look at everything that's happening around the company. I look at the stores that we're reopening, the refurbishments that we're doing. Good Lord, our new refurbished stores are looking absolutely amazing. They're looking beautiful. And when I have a look at the growth in sales that we've seen in those stores, it's extraordinary, bearing in mind that we have closed almost 200 stores in the last three years, and our major opposition has opened up over 800 doors.

So when you look at that as a swing, and then you look at the bigger marketplace that's out there, there certainly is not much in the plus column, as I talk about it. When you go to work and you say, you know, what is in the plus column for you? Not much, at the end of the day. So we have to make a fist of what we've got. We don't cry about it. And if it's going to take a little bit longer to get back to break-even and then back into profit, so be it. Because the most important thing is that it is done sustainably, and it's not just a quick blip and a quick fix-up and everybody says, wow, what a great job done, and then the company sits there again in trouble in two to three years' time.

The real success of my time with Pick n Pay will be what Spencer and Dallas and Hazel and all of the rest of the team do in the next three, four, five years. You know, God willing, I'll still be riding around fairly healthy with a bit of energy, and I can still see Pick n Pay there, thriving and growing and really becoming the most beautiful supermarket chain again. That's our goal.

Alec Hogg (12:56) There's a message there for Helen Zille, no doubt, and I suppose those critics of the GNU. It's been a long journey, but, and I'd love to get your thoughts as a business leader on how the GNU's doing, certainly from the outside you're seeing improvements at Transnet, improvements at Eskom. Nothing huge yet, but phew, you've had the experience of turning a big ship around.

Sean Summers (13:23) You know, I think it's very easy in life to sort of take the cynical approach. You know, some people, it's just the way that life is, unfortunately, the bulk of people seem to find greater pleasure in misery than they do in happiness and positivity. And you've got to ask yourself, what are the options? You know, if you don't have the GNU, well, I mean, what are the options? Compared to what? So I think one has to reach out positively, put your hands together.

You know, if you look at the whole initiative that was put together by Adrian, and that project there where they had the four pillars that they're running at and doing, there's so much good stuff coming out of that. And sure, people on the sideline will throw stones in there and what have you. But, you know, I look at the stone throwers in life. They've achieved nothing. They don't employ anybody. They don't create anything of wealth. They don't create anything for the broader society. So, you know, life's critics, I don't really ugh... you know, move on.

I'm just more interested in what you can do and the difference you can make. And, you know, we're extraordinary people in this country. Extraordinary, extraordinary, extraordinary people in this country. That old saying, 'n Boer maak 'n plan, it's very, very true in this country. We just somehow get on and get it done. And that's what we have to focus on.

Alec Hogg (14:40) Hmm. Just getting back to the Pick n Pay rating on the market. I looked at the latest numbers. So Boxer's market cap is R39 billion. Your 53% of that is worth R21 billion. The market values Pick n Pay as worth R16 billion. So they're saying the money you've got tied up in Boxer, that's R5 billion more. Plus you've got R7.7 billion in cash. Sean, when are you going to get that realised, or what is it telling us?

Sean Summers (15:19) Yeah. I think for the market, Alec, when the market can see through, and can see that there is actually a finite date by which we move towards profitability, I think that you'll see a significant rerating. But that will only come out of the actual health of the organisation, and when the company is trading properly.

And we have overcome so much, Alec. I mean, I would never write the book, but we have overcome so much in the company in the last three years. It's just extraordinary. And when I have a look at the growing capability and capacity every single day... understand this, we are up against the best in the world. And I've said this on public platforms, everywhere.

When we look at our major opposition, Shoprite Checkers, and Pieter and the job that they've done on the back end of Whitey's time there, I mean, they are amongst the finest large-scale retail operations in the world. You can look in Australia, there's nobody that can hold a candle to them. Not in the United Kingdom. Nowhere in Europe. I mean, I can think of Carrefour and all of those things. There's no way they can hold a candle to them. So we are up against the world's best. And that's what we accept. I was maybe a little bit cheeky saying that we taught them to be like that, from the good old days. But we are certainly on a journey to getting Pick n Pay back in that regard again.

But, you know, that takes people, Alec. You've got to find people. You've got to train them. You've got to put skills back into the business. Otherwise it's just a race to the bottom, delivering groceries as cheaply as possible in the back of a van, a truck, a cooler box or what have you. We've got to put the art and the pleasure back into retail again. We've got to put the pleasure back into the stores again. You've got to reward people for their time coming to a store. When they leave, they've got to feel, wow, the people were cool, that was really nice.

You know, in an increasingly disconnected world that we live in, your local supermarket, to a degree, should be that connection point again. Not for everything, because people live a promiscuous life today when it comes to provisioning their home. You know, there's virtual and there's physical, so you have this sort of split relationship. But our goal is to get the heart and the soul back into the company again, and to make sure that Pick n Pay continues to play its role in the broader society. If I look at what's been done this weekend with all of the schools rugby and the Gold Cup, what used to be the old Craven Cup...

Sean Summers (17:44) ...I go and have a look at all of the work that our people are doing out there in the market. It's beautiful. It's fantastic.

Alec Hogg (17:50) So you're putting in the spadework, and eventually that's going to come through, but it'll take time.

Sean Summers (17:55) Yep, 100%.

Alec Hogg (17:57) Just looking at the growth, before we talk about succession, because that's something you've spoken about a little bit. I look back to the first half of the 2026 financial year, and there the company-owned stores grew their revenues by just under 5%. It's now 2.5%. It's growth, but it's down on where it was a year ago. I'm sure your critics are going to say, whoa, hang on a minute, where's the momentum there?

Sean Summers (18:26) Well, I mean, any critic has got to look at the marketplace. I mean, what's happened to the world in the last six months? Get real. What, do you think we trade in another place? That some noise happens over there and we're going to trade somewhere else? I mean, really, I know you live in Mauritius, Alec, but this stuff happens in the real world out here. Stuff gets real here and it gets real fast. And you can look at the like-for-likes. I mean, you can look at the published like-for-likes of our major competitors. Our like-for-likes are better than theirs in the immediate past.

Alec Hogg (18:35) Ha ha ha.

Alec Hogg (18:57) Even Shoprite?

Sean Summers (18:58) Notwithstanding, notwithstanding all of the store networks and everything sitting on top of our heads.

Alec Hogg (19:05) Okay. So what's doing that? What's making that happen?

Sean Summers (19:08) What's doing that is the fact that we are redoing our stores, we are putting skills back in the stores, we're putting ranges back in the stores. And those are all the outcomes of that stuff, Alec. And it takes time. It takes time to do all of this. You don't just snap your fingers and it happens. It takes time.

You've got to fight the urban legend. You know, three years ago the urban narrative was, well, is Pick n Pay going to make it? You know, it could disappear, it could be gone. If you went to a braai, that was the nature of the conversation. So it takes time to change the urban narrative. It takes time to change that momentum. And it's coming. You can see it in the numbers.

Alec Hogg (19:48) You can also see it in your branding. It seems to be a very strong focus of yours, not just the Springboks.

Sean Summers (19:58) Totally. So if you have a look now, with our seven stripes, one blue stripe for each day of the week, you can have a look at all our advertising. Everything now is consistent. There is a consistent theme. There's a consistent voice that's starting to come through in the company. Far more targeted, much better targeted than there's been in the past. So, Alec, good Lord, I mean, it cuts across every single solitary piece of the company.

Alec Hogg (20:26) You talk about "Come home to Pick n Pay". Are people coming home?

Sean Summers (20:30) Yes, and that's why we can see the shift that we've had in terms of the like-for-like sales. And "Come home to Pick n Pay" will eventually morph into "the fresh food people", and then that's going to be our moat. Fresh is going to be vital for us, and a huge part of our growth at the moment is in fact coming out of fresh, which is where we want to be.

Alec Hogg (20:51) That's interesting, because your successor was the MD of Woolworths Food, which I presume gives him an inside view on fresh as well. Was that part of the reason why he was so appealing?

Sean Summers (21:08) Certainly, I think. I mean, Spencer had a very good career at Woolworths, and his last six years as managing director of Food, which will certainly be of good help for us in Pick n Pay. And then, very importantly, his experience in New Zealand. You know, the Woolworths business in New Zealand, and as we know, Woolworths Australia has got nothing to do with Woolworths South Africa. Their business in New Zealand was sort of half corporate, half franchise, roughly 22,000 employees.

So Spencer had a wonderful time in New Zealand, five, six years, and very, very tough years, because that business is also under a lot of pressure. And as I said to Spencer, had he not had that experience, we maybe wouldn't have been having that conversation. So I think it's the combination of having some real-world grocery experience in another market, in a very tough market with lots of government inquiries and tribunals. You know, the government in New Zealand tried to make the supermarket industry the bad people after Covid. So Spencer had to endure all of that. And then coming back to South Africa, I think we are very blessed to have somebody of Spencer's skill, and what he will bring to the company.

And then we also have a fantastic team in the company as well. I mean, operationally, under Dallas in the supermarket division, he's doing an extraordinary job in the supermarket division. We've got Marek doing a wonderful job for us in Boxer, as you know well, and we're dealing with his succession issue at the same time too. And then our clothing business under Hazel. You know, clothing has been through quite a tough time the last couple of years, but with the moves that we are making afoot now in our clothing business, we'll see it start to come back to the fore again.

Alec Hogg (22:56) Quite interesting. You've also got a new CFO, but a bit of a flag waved there: she was the EY audit partner on the Pick n Pay account. Is that a normal progression, for auditors to go into their clients?

Sean Summers (23:13) Well, if you have a look, I mean, it wouldn't be the first time. It's happened before. You could see, you know, Reeza left EY before and he ended up at Woolworths, CFO there. You know, Tina was a long-time audit partner at Pick n Pay, and on many, many other accounts that she was on. And we're truly blessed to have Tina.

You know, Lerena was absolutely extraordinary at the time. She helped me when I came back with some very, very tough things, you know, from the very complicated debt structure that we had. Then we had to do the rights offer. Then we had to do the Boxer IPO. So Lerena certainly played a massive role in doing all of that. And to hand over to Tina now, we've got a really strong team in place.

Alec Hogg (23:53) So when Spencer Sonn joins you, which is in February, on the first of February next year, you're going to be working together for well over a year, until your contract expires in May 2028. So who makes the decisions during that period?

Sean Summers (24:11) So, to be clear, the responsibility for the result of the company is mine up until February '28. So the fortunes of the company are clearly my responsibility. And I will work out with Spencer how the handoff goes to Spencer, and we will deal with that in the appropriate manner. Spencer needs to acclimatise himself to the company. It's not a case of just a handover. We trade across the length and breadth of the country. There are many, many divisions he's going to have to get a feel for. So there'll be a comprehensive handover period, and I think it's good that we actually have this period to be able to deal with this.

And then similarly, at the same time, Justin steps into Boxer. I'm chair of Boxer as well, and Boxer, as you know, has always been very, very near and dear to my heart, and I will continue to play a role in that regard as well. But we have Marek until November, because Marek ends in March, and then we've got Marek for another six months to November. So I'm all for orderly handover.

Alec Hogg (25:09) I was going to ask you about that, because it seemed like a good idea to have James Formby as the chair there, you running Pick n Pay. But now you run Pick n Pay and you're the chair of the most important part of Pick n Pay, certainly at the moment, the profitable part. When there are conflicts... for instance, Marek said they bought, sorry, yeah, they bought a couple of Pick n Pay stores into Boxer, and Pick n Pay runs their cash. Where do you stand on that?

Sean Summers (25:37) The problem with Marek is getting him to pay for the stores when he buys them, because they're very tough. They're very tough in Boxer. So there's no executive decree where you just say it's moving across at this price. That's a long, hard negotiation. Those blighters are where they are because they are tough.

We just do a consolidated treasury function in the company, because it doesn't make any sense to split it up. So, you know, we have an independent board in Boxer. We've got an independent lead director, and we've got a fantastic board in Boxer. We really do. We've got a great board in Boxer. We allow Boxer to carry on and do what it does, and Pick n Pay continues to do what it does.

And in fact, now, we're about to open a store in the West Rand, in a new shopping mall that the McCormicks are opening. We've got both Boxer and Pick n Pay in there. We've got Bunny, one of our great, great Pick n Pay franchisees, going into the centre.

Alec Hogg (26:38) Hm. Yeah. The McCormicks are doing good business. That exemplar of theirs, my goodness. Sean, just to finish off: when you leave Pick n Pay, when your contract expires, does that mean you leave Boxer as well?

Sean Summers (26:57) I'll still be on Boxer for a little bit, until my time runs out there. So I'll be on Boxer still for a year or two post the end of my time at Pick n Pay.

Alec Hogg (27:09) And if you were to take one story out of these results that you'd like to tell shareholders, what is it?

Sean Summers (27:17) I think that the major story coming out of these results, Alec, is that on the labour front we've settled that. Because, you know, that could have been a major hiccup for us if we'd had to have a protracted period of disruption with the Section 189. So I think that that is a major thing. I think it's a huge feather in all of our caps that we've managed to address that in the manner that we have. Nobody really gave us a chance to do what we've achieved there. So that would be call-out number one.

The second call-out is very strong like-for-like, good like-for-like sales growth, ahead of the market, ahead of our major competitors. So that's another indicator that things are moving firmly in the right direction.

And then also, on the succession front, in both Pick n Pay and Boxer we have great succession in place, well-experienced retailers in both camps, and a strong, growing management team within Pick n Pay. And people can see it from the outside. They can see our marketing, they can see our positioning, they can see all of the wonderful stuff that's going on in the community.

Alec Hogg (28:19) Is it a happy company yet?

Sean Summers (28:21) Yes, it definitely is. When you walk around... I mean, again, Alec, talk to suppliers. I'm not the only point of reference. You can talk to suppliers, you can talk to landlords. I mean, two years ago the landlords hardly even wanted to talk to us. It's very different today. You know, we've got landlords that are sitting down, actively engaging with us. We're still looking... I mean, we still have problems, stores in the company that are still misshapen, too big, that we need to reconfigure. But that whole dialogue has moved onto a completely different plane.

And, you know, you don't want to call out the big suppliers, but I guess there's the breweries. I had them in my office the other day with their senior management team. And you can just get the feeling from them just how they enjoy doing business with Pick n Pay again. Because, you know, that's a very important part of the business. Business is hard. Retail business is hard, day to day. And it's very, very important that you have fun doing what you do and that you feel dignity in doing what you do.

Alec Hogg (29:21) And we need to watch, then, that R500 million that the stores are still losing. You've got plenty of cash. If you think about the tech world, you can have a hell of a lot of cash burn, a lot of burn, before your cash gets impacted. But presumably we have to watch that R500 million falling.

Sean Summers (29:41) You do, Alec, absolutely. But, you know, one must look at Pick n Pay... it's our 60th year coming up now. One almost needs to look at Pick n Pay as a new business. It fell over three years ago, to all intents and purposes. We're still in the investment phase. So the important thing is what happens to Pick n Pay in four, five, six, eight, ten years' time. That's where the real value is.

So for me, I say to the market, and we're going to spend this week going around talking to the market: it's not a case of "will you be invested in Pick n Pay?" It's a case of "when will you be invested in Pick n Pay?" And we've got great long-term loyal shareholders that have been with us, that have walked the road with us, and that have been absolutely fantastic. And then the rest of them, you know, the in-and-out burgers, as I call them, they'll be there. As soon as they can see the light at the end of the tunnel, and it's a little less risky for them, they'll be there in droves, trust me. For the very reason that you talk about: the unwind of the current valuation. I mean, there's a massive discount sitting in there.

Alec Hogg (30:40) Sean Summers is the chief executive of Pick n Pay, and I'm Alec Hogg with BizNews Edge.

BN Edge | CEO Sean Summers: Pick n Pay's long road back from the brink