Samantha Enslin-Payne
Pick n Pay is planning to retrench more than 3 000 workers due to declining profits and a loss of market share, a move that analysts say highlights the fundamental problems facing the grocery retailer.
Yesterday Pick n Pay said it had notified the SA Commercial, Catering and Allied Workers Union (Saccawu) that, due to operational requirements, it was contemplating the retrenchment of about 3 137 full-time workers.
Pick n Pay operations director Neal Quirk said the decision was in line with the major problems facing the company of declining profitability and loss of market share. “The decision was not taken lightly but was required to ensure the viability of the business and its employees into the future.”
Pick n Pay employs 36 673 people. Its latest annual report puts salaries, wages and other benefits at R4.3 billion.
Quirk declined to say what saving would be made once the retrenchments were finalised as the number of people affected had yet to be determined.
He also would not elaborate on what options there were to limit the retrenchments, as these would be discussed with the union.
But Lee Modiga, the head of collective bargaining at Saccawu, said Pick n Pay wanted to enforce “ultra flexibility”, including working on Sundays. He said that once full-time workers were on a flexible arrangement, the company would terminate variable time employees.
Modiga said that the retrenchments were preparatory to a deal between Pick n Pay and UK retailer Tesco.
But Quirk denied this, saying: “Absolutely not.”
Pick n Pay has hit the doldrums in recent years, reporting in April that profit from continuing operations was down 29 percent year on year to R908 million.
Chris Gilmour, an analyst at Absa Investments, said Pick n Pay staff cuts were not a right-sizing exercise, but a sign of something more fundamental.
“This is a re-engineering,” he said, adding that group was now doing what it should have done a decade ago, including building distribution centres and investing in technology.
Without retrenchments the group’s cost base would remain uncomfortably high. “For retailers staff costs are the biggest cost,” Gilmour said.
Quirk said Pick n Pay’s employee costs were way above the rest of the sector.
He added that the strike in November at Pick n Pay was not the issue, rather it was the continual decline in market share over the last 18 months. This was due to competitors opening more new stores in a race for space, “which has an immediate effect on our market share”.
Quirk said it was common knowledge that Pick n Pay was playing catch up in terms of investment in distribution centres and in technology. But the process had speeded up.
“We are doing a lot of work to try to establish Pick n Pay as a sustainable brand.”
Gilmour said the company’s recovery was a few years off as it was still building distribution centres and had yet to reap the benefits of the technology it had invested in. “The next few years are going to be tough.”
Gilmour said the pending staff cuts at Pick n Pay might be a sign of wider scale retrenchments in retail.
Pick n Pay Stores gained 0.67 percent to R42.14 yesterday. Business Watch, page 2