Pick n Pay plans store downsizing across South Africa estate

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Pick n Pay store downsizing

Highlights

Pick n Pay will downsize store footprints across South Africa, focusing on lease renewal opportunities to align space with current trading needs.
The retailer's Hypermarket division faces large-format store inefficiencies, prompting fundamental reconfigurations like the Faerie Glen project with a new 3,000-square-metre Woolworths Food opening.
Occupancy costs fell 2.6% (normalized) in the six months to 30 August, with capital expenditure rising from R300 million in H1 to a planned R1.4 billion in H2 for store revamps and repairs.

Lease renewals drive space reset

As reported by Moneyweb, Pick n Pay says it will keep trimming floor space across its store network because many outlets remain too large for current trading needs.

Chief executive Sean Summers says a number of stores are still not fit for purpose, adding that this is a broader issue for retailers operating large estates. He points to the Kenilworth Centre store near the group’s head office as an example, saying the outlet is about 6,000 square metres and could be reduced by roughly half.

Summers says the group is in discussions with landlords to move stores to more appropriate sizes, with the strongest focus on lease renewal points. He adds that new CFO Tina Rookledge recently pushed the team to review its progress and that the analysis showed more had already been achieved than expected.

Capex rises for revamps and reconfiguration

The retailer is also looking at larger-format stores in its Hypermarket division where current footprints no longer support viable sales densities. Summers cites the Brackenfell site, saying the building is too large in its current form to generate enough sales to justify the space.

He says Pick n Pay needs to work with landlords to reconfigure some centres more fundamentally, similar to the project under way at Faerie Glen in Pretoria East. At that site, a new 3,000 square metre Woolworths Food store is due to open alongside other line shops.

In the six months to 30 August, Pick n Pay’s occupancy costs fell 2.6% on a normalized basis. The group spent R300 million in capital expenditure in the first half and plans to lift that to R1.4 billion in the second half, with priority given to strategic store revamps as well as critical repairs and maintenance.

In our earlier article on Equites Property Fund’s interim results and UK exit strategy, we explained how the logistics REIT raised its interim distribution after accelerating disposals in the UK and redirecting capital to South Africa. We noted that proceeds from the Aviva portfolio sale helped reduce leverage and bolster liquidity, positioning the group to reinvest in domestic logistics assets and developments.

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