Introduction

South African grocery giant Pick n Pay has decided to exit the Nigerian market, opting to sell its 51% stake in a joint venture as part of a broader strategy to focus on core markets, CEO Sean Summers announced on Monday. This marks another retreat by an international brand from Nigeria, Africa’s most populous nation, due to market profitability challenges.

A Brief Foray into Nigeria’s Retail Market

Pick n Pay ventured into Nigeria fewer than five years ago in partnership with A.G. Leventis (Nigeria), setting up two stores, including a flagship outlet in Victoria Island, a high-end commercial and residential area in Lagos. However, the retailer’s time in Nigeria was marked by challenges, leading to this decision to divest and streamline its operations closer to home.

Financial Strain Fuels the Decision to Exit

The decision to pull out of Nigeria comes on the heels of Pick n Pay’s increased financial pressures. Reporting its half-year results, the retailer revealed a widening loss, primarily due to a downturn in its supermarket operations and escalating borrowing expenses. For the 26 weeks ending August 25, Pick n Pay posted a loss before tax and capital items of 1.1 billion rand ($62 million), significantly higher than the 837.2 million rand loss recorded during the same period last year.

In the core Pick n Pay division, trading losses rose by 9.1% to reach 718.9 million rand, a challenge the company attributes to shrinking gross profit margins in an intensely competitive environment.

Bright Spots: Pick n Pay’s Clothing and Online Sectors

Despite setbacks in its primary supermarket segment, Pick n Pay reported strong growth in its clothing and online divisions. These areas exhibited “solid momentum,” according to the company, with notable performance improvements within its company-owned supermarkets. Summers, who is spearheading efforts to revitalize the retailer, shared a sense of "quiet confidence" about the possibility of reducing Pick n Pay’s trading losses by up to 50% by year-end.

Boxer Division to Lead Growth with IPO on the Horizon

One of the bright spots in Pick n Pay’s portfolio has been its low-cost Boxer division, which posted a 16% increase in trading profit, reaching 801.4 million rand. This was driven by a robust 12% boost in sales, underscoring Boxer’s position as a key growth driver within the company.

Looking forward, Pick n Pay has announced plans to list Boxer on the Johannesburg Stock Exchange by year-end. The initial public offering is expected to raise up to 8 billion rand ($452 million), positioning it as the continent’s largest market debut of the year.

Looking Ahead: Restructuring for Stability and Growth

As Pick n Pay refocuses its strategy around strengthening core operations in South Africa, it continues to explore ways to stabilize and drive profitability in its key divisions. With the upcoming Boxer listing, Pick n Pay is set on solidifying its footprint in the budget-friendly retail segment while reestablishing a stable financial footing for the future.