South African retailer Pick n Pay is targeting some of its largest stores for downsizing, with management arguing that smaller outlets could generate better sales while reducing operating waste.

One supermarket measuring about 6,000 square metres could lose nearly half its floor space under the plan.

The strategy shifts the retailer’s turnaround effort beyond closing loss-making outlets to rethinking how much space its remaining stores actually need.

Chief executive Sean Summers says some locations are simply too large for the sales they can generate, creating an opportunity to improve profitability without necessarily sacrificing revenue.

For South Africa’s competitive grocery market, the changes could reshape how Pick n Pay allocates capital, negotiates with property owners and competes for customers as retail development slows and existing store networks become more important.

Smaller stores, better returns

Pick n Pay plans to use lease renewals as a key opportunity to reduce oversized premises and renegotiate how its stores occupy retail centres.

Summers cited the retailer’s Kenilworth Centre supermarket, near its head office, as an example.

The store currently occupies about 6,000 square metres, but management believes it could remove approximately 2,500 to 2,800 square metres and still operate more efficiently, potentially generating even higher turnover.

The company is also reassessing its big-box Hypermarket format. Its Brackenfell store occupies about 14,000 square metres of gross lettable area, which Summers considers excessive for the sales the location can realistically achieve.

Rather than simply shrinking individual stores, Pick n Pay wants to work with landlords on broader redevelopment projects.

At Faerie Glen in Pretoria East, the plan involves creating a roughly 6,500-square-metre New Age Hypermarket while redeveloping the remaining 8,000 to 9,000 square metres of the centre.

The redevelopment will include a new 3,000-square-metre Woolworths Food store and other smaller retail outlets, illustrating how surplus supermarket space could accommodate a wider mix of tenants.

Occupancy costs and investment

The retailer’s property strategy comes as its occupancy costs declined by 2.6% on a normalised basis in the six months ended August 30.

Pick n Pay does not disclose the total floor area across its store network, making it difficult to determine the overall scale of the planned reductions.

Capital expenditure is also set to increase sharply in the second half of the financial year. Pick n Pay spent R300 million($18 million) in the first half, matching the amount spent by its subsidiary Boxer.

That spending is expected to rise to R1.4 billion($84 million) in the second half, with chief financial officer Tina Rookledge identifying strategic store renovations, selected franchise acquisitions and essential repairs and maintenance as priorities.

Summers said major stores, including those at the V&A Waterfront and Canal Walk, are scheduled for renovation next year.

The investment programme indicates that the company is not abandoning its physical retail network but attempting to make selected locations more productive.

Fewer expansion opportunities

Pick n Pay added a net five supermarkets in the six months to August 30, partly through the acquisition of franchise outlets, bringing the total number of acquired outlets to 290. Its franchise division, meanwhile, declined to 207 outlets, 11 fewer than six months earlier.

Summers said the pace of retail development in South Africa had slowed, limiting the number of suitable areas available for new stores. He also suggested that some expansion decisions by rival Shoprite reflected planning undertaken four or five years earlier.

Founded in 1967, Pick n Pay operates supermarkets and other grocery formats across Southern Africa. Its current focus on store efficiency reflects a broader challenge for established retailers: extracting stronger returns from existing locations rather than relying solely on opening additional outlets.