Pick n Pay chief executive officer, Sean Summers, says the aggressive expansion across South Africa’s retail sector could undermine long-term profitability.
Speaking after the group’s earnings release on Monday, and reported by Bloomberg, Summers cautioned against retailers who are prepared to just open stores at any cost.
Retail square metreage per capita in South Africa is approaching, or even exceeding, that of the United States, he noted, expressing concern over the sustainability of such rapid physical expansion in a market with much lower consumer spending power.
Company disclosures show that the top five retailers opened more than 700 stores in 2024 and have already added 230 new outlets in early 2025, said Summers.
This comes despite the National Treasury cutting its economic growth forecast to an average of 1.6% over the next three years – down from 1.8% – due to subdued domestic demand and global trade uncertainties.
Pick n Pay’s own strategy has diverged from the expansionist trend. The company is in the midst of a turnaround plan, which has included closing underperforming stores and refocusing efforts on its value segment.
Meanwhile, rivals such as Shoprite and Pepkor continue to scale up their store networks. Pepkor, South Africa’s largest retailer by footprint, reported 168 new store openings in just six months to March 2025—an average of 28 stores per month—as it pushes deeper into value-focused apparel, electronics, and cellular categories.
Shoprite Group, Africa’s largest retailer said in its financial results for the 26 weeks ended 29 December 2024, that it opened 248 stores, with 122 more in the pipeline.
Retailers like Woolworths and Spar are struggling to keep pace. The former is with margin pressure and shifting consumer behaviour towards more affordable shopping baskets, while SPAR is battling to keep market share amid rising competition – particularly from the rapid growth of online grocery platforms.
Analysts warn that without corresponding growth in consumer demand; the sector risks a glut of underutilized retail space.
“Sales densities in South Africa must be much lower than in the US because obviously per capita spending in South Africa is well below the US,” said Charles Allen, a London-based analyst at Bloomberg Intelligence.
“It does make you wonder how people eventually are going to justify the return on the investment.”
Despite pockets of resilience in the value segment, the broader environment remains difficult. High unemployment, stagnant incomes, and slow economic growth continue to limit household spending.
