South African Ackerman family gives up control of Pick n Pay after challenging year

Omokolade Ajayi -

Key Points:

  • Founding family gives up control of South African retailer Pick n Pay after a rough year with losses and falling stock price.
  • Pick n Pay revamps strategy with new leadership and seeks $217 million to revive the business amidst tough economic conditions.
  • Pick n Pay shares jump after leadership reshuffle, but analysts remain cautious about the retailer’s future.

One of Africa’s leading retailers, Pick n Pay Limited, is undergoing a major shakeup as the founding Ackerman family — which ranks among South Africa’s richest families — relinquishes control over the struggling retailer. The move aims to push Pick n Pay back on a path of revenue and earnings growth.

Gareth Ackerman, chairman and son of the late retail tycoon Raymond Ackerman, announced his resignation alongside a plan to cede majority shareholder voting rights. This comes after a “weak FY24 result” driven by significant losses in the core Pick n Pay supermarket business, according to a Tuesday statement.

Pick n Pay revamps strategy amidst challenges

The move follows a tumultuous 2023 for Pick n Pay. The company brought back former CEO Sean Summers after issuing a profit warning — its first interim loss in over two decades. South Africa’s challenging economic climate, with high inflation, has squeezed consumer spending, pushing budget-conscious shoppers towards cheaper competitors.

Pick n Pay’s struggles are reflected in its financial performance. The company skipped a dividend payout for the full year, reported a hefty R2.8 billion ($153 million) impairment on its stores, and faced increased borrowings leading to higher interest charges. It also secured a standby underwriting agreement with Absa Group, Rand Merchant Bank, and Standard Bank Group’s South African unit.

“The Ackerman family has been contemplating the need for renewal at Pick n Pay for some time,” said Gareth Ackerman.  “The recent difficulties presented an opportune moment to accelerate this process.” The Ackerman family’s investment vehicle has pledged to support a planned R4 billion ($217 million) rights offer, a critical element of Pick n Pay’s turnaround strategy.

Pick ‘n Pay shares surge 6.3 percent

South African retailer Pick ‘n Pay, headquartered in Cape Town, operates over 2,000 stores across eight African countries. The Ackerman family, led by Gareth Ackerman, currently holds a combined 25.53 percent stake (124,677,238 shares).

The company’s stock has mirrored its recent struggles, plunging 28 percent over the past year, making it one of the worst performers on the Johannesburg Stock Exchange (JSE). In a bid to reverse this trend, Pick n Pay announced a leadership reshuffle. Gareth Ackerman emphasized that relinquishing control is intended to empower CEO Pieter Summers and his team to lead the company’s transformation.

Investors reacted positively to the news. Pick n Pay’s shares surged 6.3 percent on the JSE, pushing the group’s market capitalization above $680 million. Investors and other market participant hope the leadership shakeup and strategic shift will navigate the company back to profitability. However, analysts remain cautious. Questions linger about the effectiveness of the company’s turnaround plan and Pick n Pay’s ability to regain lost market share.