Pick n Pay shares fall as it continues to lose customers

Pick n Pay Stores’ shares fell the most in two years after first-half sales growth failed to convince investors the South African grocer is doing enough to regain market share.

Net income advanced 37% to R261.9-million in the six months through August, while same-store sales growth climbed 4% the Cape Town-based company said in a statement on Thursday. Pick n Pay raised the interim dividend 32% to 19.6 cents a share.

“While Pick n Pay has been strong in top-line income, when I look at like-for-like sales and strip out inflation I see volumes down 2.5%,” Alec Abraham, an analyst at Sasfin Securities in Johannesburg, said by phone. “That suggests Pick n Pay is still losing customers. It’s not moving in the right direction quickly enough.”

South African retailers have struggled this year as accelerating inflation and unemployment of more than 25% have constrained spending. Shoprite Holdings, South Africa’s biggest food retailer, posted slowing full-year profit and sales growth in August. Pick n Pay last year hired chief executive Richard Brasher, a former director at Tesco, to lead a turnaround of the company after costs spiraled and market share fell.

“I’m always happier if underlying like-for-like volumes are up,” Brasher said by phone. Stock availability remains a challenge and “if I managed to actually put everything on the shelf that I ordered, then I would sell a lot more.”


Slowing growth
Pick n Pay shares dropped as much as 6.5%, the biggest intraday decline since October 5 2012, and traded 4.2% lower as of 12.33pm in Johannesburg. The stock has lost 2.4% this year, compared with a 19% decline at Shoprite and a 6.8% fall at Woolworths Holdings.

“In South Africa, the low income side of food retailing is very competitive and is where Shoprite is strong,” Abraham said. “My concern is that Pick n Pay is struggling to regain market share in the upper income side, which has been its core business.”

Pick n Pay opened 46 supermarkets and closed five in the six-month period, bringing its total to 1 117 outlets, and spent R110-million improving existing stores. The company plans to set up more than 80 new outlets in the second half, accelerating its store-opening program, it said.

The company’s like-for-like sales in Africa outside its home market climbed 7.8%. Pick n Pay, which closed its Mauritius and Mozambique franchise operations last year, plans to open stores in Ghana and is “close to completing our assessment of the opportunity in Nigeria.” – Bloomberg

Subscribe to the M&G

These are unprecedented times, and the role of media to tell and record the story of South Africa as it develops is more important than ever.

The Mail & Guardian is a proud news publisher with roots stretching back 35 years, and we’ve survived right from day one thanks to the support of readers who value fiercely independent journalism that is beholden to no-one. To help us continue for another 35 future years with the same proud values, please consider taking out a subscription.

Related stories

Surveys predict Black Friday likely to fuel e-commerce

Fear of contracting the coronavirus while fighting off other shoppers will probably change how people shop for sales

Big retailers need to step up to the plate

To stave off a multi-generational malnutrition crisis, the food industry must work with government to provide highly nutritious foods at cost during the pandemic

Lockdown hampers Edcon business rescue – analysts

Independent retail analyst Syd Vianello says going under business rescue does not mean Edcon will be saved, “it simply gives business rescue practitioners a chance to work out how they can save the company”

CCMA cases stunted by lockdown

Data shows that during the lockdown the statutory body has dealt with 75% fewer cases than during the same period last year

Pick n Pay workers lose their jobs for ‘striking’ during the lockdown

A group of workers have been dismissed, but they insist they never embarked on industrial action in the first place

Pepsi’s Pioneer acquisition is not healthy

The move may provide a short-term economic boost, but it also has long-term health costs
Advertising

Subscribers only

FNB dragged into bribery claims

Allegations of bribery against the bank’s chief executive, Jacques Celliers, thrown up in a separate court case

Dozens of birds and bats perish in extreme heat in...

In a single day, temperatures in northern KwaZulu-Natal climbed to a lethal 45°C, causing a mass die-off of birds and bats

More top stories

ConCourt asked to rule that Zuma must testify for 10...

It is Zondo's legal end game and will leave the former president, his supporters and those implicated in state capture to increasingly play fast and loose at imputing political motive to the commission

Carlos on Oozymandias’ goodbye grift

"Look on my works ye Mighty, and gimme 50 bucks!"

This is how the SIU catches crooks

Athandiwe Saba talked to the Special Investigating Unit’s Andy Mothibi about its caseload, including 1 000 Covid contracts

Richard Calland: Not much has shuffled in the political pack

Stocktake at the end of a momentous year shows that the ruling party holds all the cards but has little room for manoeuvre
Advertising

press releases

Loading latest Press Releases…