Summers’s return to PnP shows there was simply no Plan B

Why would any board hire back a former CEO who is now 70 years old to lead the business?

The announcement that Sean Summers would take over as Pick n Pay CEO “with immediate effect” was staggering.

Read: Boone out as Pick n Pay CEO, Summers back in

Of course, Summers is no stranger to the business, having been with the group for 33 years, including 11 as MD and CEO in the late 1990s and early 2000s.

But he is 70. And he’s been out of the country for the best part of two decades. A lot has changed.

A look at the share prices of Shoprite, the king of supermarket retail in SA, and Pick n Pay (which it dethroned) reveals a clear hint.

It is undoubtedly especially sobering for the Ackerman family, which remains the largest shareholder in Pick n Pay (and also retains control of the business).

At this point, a substantial portion of the family’s wealth is directly tied to the performance of the group, whether through share price appreciation or dividends.

In the nearly 17 years since January 2007, the share price of Shoprite Holdings is up 820%, give or take, while Pick n Pay’s is down about 5%. In truth, it never rose by more than 150% from its base in 2007, the year Summers departed as CEO.

Had it performed even half as well as Shoprite, the family’s 25% stake in the group would be worth around R15 billion versus the less than R4 billion its valued at today. That’s a material difference.

It goes without saying that the family had decided to effectively fire Dutch CEO Pieter Boone, who only started in the job in April 2021.

Boone’s position had become increasingly untenable. The decision to split Pick n Pay into two brands (by introducing Qualisave) is not yielding results as quickly as expected – and may yet be reversed. Sales for the half-year are practically flat and with inflation at 8.3%, this means volumes are down by 8%.

Even after excluding once-off (“incremental abnormal”) costs of R565 million in the six months, it expects to report a loss later this month.

This, despite it saying in July that “on an underlying earnings basis the group does not anticipate a loss for the period.” This shocked investors, and shares were sold down 15% on Monday.

This was likely the proverbial straw that broke the camel’s back, and you can be sure that the board meeting before the trading update in July was a heated affair. The family was no doubt already discussing the possibility of replacing Boone then.

Raymond Ackerman’s passing last month could’ve given the family the latitude to make this change. (Summers flew out for the memorial.)

To replace Boone, the family settled on its trusted general Summers (who attended Bishops with the founder’s son Gareth), someone they have a long, deep relationship with and whom they trust implicitly (the messiness of his departure after being caught speeding in his Ferrari in Gauteng aside).

Someone has to fix this mess

The problem is that Pick n Pay has been almost perpetually stuck in turnaround after turnaround (after turnaround) since Summers left.

Nick Badminton, also a Bishops boy and PnP lifer (until he resigned), was a safe pair of hands but the share price tells the tale of the retailer’s slow and unremarkable flatlining.

Richard van Rensburg, another insider, was a short-term temporary fix.

Richard Brasher, ex-Tesco and a dyed-in-the-wool retailer, arrived with much fanfare in 2013 and did what he could to drag the business – particularly the core Pick n Pay one – into the 21^st Century. But, with his British and developed world view and experience of grocery retail, this was only going to get Pick n Pay so far.

Experienced, and shrewd

Boone’s experience in emerging markets looked great on paper, and no doubt in the many conversations he would’ve had with chair Gareth before the board settled on his appointment.

He was shrewd to identify Boxer and Pick n Pay Clothing as the two major growth vectors of the group and, from a position of weakness, to seal a commercial services agreement with Takealot that saw it become the de facto supplier of groceries on the Mr D app.

Had he not done this, the group would’ve been in even bigger trouble. Many of the issues the retailer is struggling with today have been festering for a decade-plus.

But the core Pick n Pay business is in as bad a shape as ever – the numbers speak for themselves.

What’s the plan?

Quite what Summers’s mandate is, and how this all plays out, is anyone’s guess. He’s not there to fill a gap for six months but, equally, he’s not about to spend five-plus years fixing Pick n Pay.

Has he been asked to dress the business up for a sale? There’s tons of speculation and whispers in the market about this, but he probably doesn’t have the time. (And one gets the sense that isn’t the Ackerman family’s style.)

He must fix Pick n Pay – plain and simple. Sure, he has “unrivalled” experience, to quote Gareth.

Thing is, many of his relationships with partners and suppliers simply don’t exist anymore. A decade or two is a long time.

Whether the family/board has a clear plan beyond Summers is equally a mystery.

Where is the pipeline of talented senior managers in the business? There’s been an obvious executive vacuum since Van Rensburg. They’ve been caught flatfooted now (as they were when Badminton resigned) and the group has – and, critically, had – practically no clear succession plan in place.

That’s why they’ve hired a 70-year-old as CEO.