South Africa’s retail sector has navigated through a turbulent economic landscape in recent times, with stubbornly high inflation, surging food and fuel prices, and the enduring effects of load shedding. Despite these challenges, some of the country’s leading retail CEOs have seen their earnings soar, illustrating their ability to steer their companies through these trying times.

Woolworths’ CEO, Roy Bagattini, stands out as the highest earner among his peers, nearly doubling the compensation of his closest rival, Shoprite’s CEO, Pieter Engelbrecht. This raises questions about the remuneration of top executives in a climate of economic uncertainty.

Retailers Tackle Challenges Head-On

Over the past 18 months, South African food retailers, including Woolworths, Shoprite, Spar, and Pick n Pay, have had to contend with substantial expenses to mitigate the impact of load shedding and other operational cost escalations. Despite these hurdles, many of these retailers have managed to maintain strong trading performance, driving revenue and expanding their businesses.

Woolworths, in particular, demonstrated robust growth in its financial results for the fiscal year ending on June 30, 2023. A significant contributor to this growth was the sale of the troubled Australian retailer, David Jones. Earnings per share (EPS) increased by 42.1% from FY22 to FY23, and headline earnings per share (HEPS) experienced a remarkable surge of 295%. The board responded by increasing the total dividend by 36.4%, reflecting the company’s financial health.

Shoprite also reported impressive results for the 52 weeks ending in July 2023. The company gained record market share as merchandise sales surged by 16.9% to R215 billion, driven by its core Supermarkets RSA segment. Sales of merchandise within this segment grew by 17.8% to R173.6 billion. These strong results have positioned both Woolworths and Shoprite favorably with their shareholders.

However, it hasn’t been smooth sailing for all retailers, as evidenced by Pick n Pay’s substantial loss for the six months ending on August 27, 2023. Load shedding expenses and employee restructuring significantly impacted the group’s key core supermarket business, leading to a pro forma loss before tax and capital items of R837.2 million. The group’s headline earnings per share (HEPS) dropped by 241.5%, from a profit of 97.73 cents per share in H1 FY23 to a loss of 138.24 cents per share in H1 FY24.

CEO Compensation Soars

Amidst these diverse financial outcomes, CEO remuneration in the South African retail sector has come under scrutiny.

Woolworths’ CEO, Roy Bagattini, emerged as the highest earner, with a total compensation package of R122.47 million in 2023. This total included R90.6 million for his work in South Africa and AUD$2.6 million (R31.8 million) for his contributions in Australia, where the group’s clothing chain, Country Road, is located. Bagattini’s remuneration comprised a guaranteed pay of R20.4 million, short-term annual incentives (STIs) of R28 million, long-term share options worth R66.7 million awarded three years ago, and R7.1 million in share dividends. When excluding the long-term share options and share dividends, Bagattini’s total basic pay with short-term annual incentives amounted to approximately R48.4 million. This translated to a daily income of around R335,529.

Shoprite’s CEO, Pieter Engelbrecht, had a total pay package of R64.66 million in the 2023 financial year, which included long-term incentives like share allocations. Excluding the long-term incentives, Engelbrecht’s basic pay and short-term incentives amounted to roughly R38 million. Even without these long-term incentives, Bagattini outearned Engelbrecht by R10 million, as revealed in the annual reports of both companies. This stark difference in compensation comes despite Shoprite’s market value of R140 billion, significantly larger than Woolworths’ R46 billion. Shoprite also boasts a more extensive network of stores.

It’s essential to understand that company remuneration committees factor in multiple variables when deciding on pay packages and their structure, which may include share price performance.

Pick n Pay’s Pieter Boone received significantly less compensation, equivalent to just over a third of what Engelbrecht earned and more than five times less than Bagattini. Boone earned R24.69 million in 2023, translating to a daily income of R67,643. Notably, despite Boone’s removal from the CEO position due to the poor performance of Pick n Pay’s core business, he received a performance bonus of R9.8 million.

Sean Summers has assumed the role of CEO at Pick n Pay, effective as of October 2, 2023, with the aim of revitalizing the retailer and steering it back on course.

The varying compensation packages among South African retail CEOs underscore the complex dynamics at play in the retail sector, where financial performance, market capitalization, and individual company strategies all contribute to executive pay decisions. As the retail industry continues to evolve, the debate surrounding executive compensation in challenging economic climates will likely persist.