{"id":465673,"date":"2022-10-22T10:59:11","date_gmt":"2022-10-22T08:59:11","guid":{"rendered":"https:\/\/mybroadband.co.za\/news\/?p=465673"},"modified":"2022-10-22T10:59:49","modified_gmt":"2022-10-22T08:59:49","slug":"why-pick-n-pay-is-getting-hammered","status":"publish","type":"post","link":"https:\/\/mybroadband.co.za\/news\/investing\/465673-why-pick-n-pay-is-getting-hammered.html","title":{"rendered":"Why Pick n Pay is getting hammered"},"content":{"rendered":"

Pick n Pay\u2019s interim results<\/a><\/strong> revealed an 11.5% year-on-year revenue increase and a higher gross profit margin which helped to grow profits from R348.8 million to R453.3 million.<\/p>\n

Many analysts, including Wayne McCurrie from FNB Wealth and Investments, viewed Pick n Pay\u2019s results as good and in line with expectations.<\/p>\n

Pick n Pay CEO Pieter Boone also said he was pleased with the progress achieved across Pick n Pay and Boxer over the past six months.<\/p>\n

However, the market did not share this view. Pick n Pay\u2019s share price plummeted by 9% on the day of the results.<\/p>\n

It raises the question of why the market took such a dim view of the retailers\u2019 latest results despite the positive numbers.<\/p>\n

One reason may be that there is a lot of uncertainty in the macroeconomic environment which will impact Pick n Pay.<\/p>\n

Pick n Pay CFO Lerena Olivier said continued load-shedding will impact their operations in the second half of the year.<\/p>\n

She added that inflation would continue to play a role, and higher fuel costs would also hurt the business.<\/p>\n

\u201cWe are working hard to mitigate these but have cautioned that they will impact our second-half earnings,\u201d she said.<\/p>\n

However, these factors do not adequately explain the severe market reaction to Pick n Pay\u2019s latest finances.<\/p>\n

\"\"<\/a>

Pick n Pay share price before and after its results<\/p><\/div>\n

Expert analyst opinion<\/strong><\/h2>\n

To get more insight into the share price move, Daily Investor spoke to Alec Abraham, a senior equity analyst at Sasfin Wealth.<\/p>\n

Abraham has two decades of experience in the finance field and is an expert on the South African retail market.<\/p>\n

He explained that although Pick n Pay\u2019s pro forma headline earnings per share were up 25.3%, the group is still, in absolute terms, below its pre-Covid levels.<\/p>\n

Compared to its industry peers \u2014 Shoprite and Spar \u2014 this shows that Pick n Pay is not performing well.<\/p>\n

Spar and Shoprite managed to increase their earnings per share beyond pre-Covid levels, but although Pick n Pay\u2019s earnings per share increased by 52%, it is still marginally lower than pre-pandemic levels.<\/p>\n

The graph below shows how Pick n Pay, Shoprite, and Spar\u2019s basic earnings per share.<\/p>\n

\"\"<\/a><\/p>\n

Pick n Pay\u2019s most recent pro forma headline earnings per share (HEPS) remains below its comparable 2019 (1HFY2020) pre-Covid levels.<\/p>\n

Shoprite and Spar, in comparison, have increased their respective HEPS well above their comparable 2019 figures.<\/p>\n

\"\"<\/a><\/p>\n

Another thing the market paid attention to is the individual performances of Pick n Pay and Boxer.<\/p>\n

For the first time, the retailer differentiated its South African region sales between Pick n Pay and Boxer stores.<\/p>\n

The split revealed that the Boxer stores grew their turnover by 27.2% while Pick n Pay stores only grew their sales by 5.4%.<\/p>\n

Abraham said that the new reporting could be another reason for the significant drop in the share price as the disclosure reveals that Pick n Pay stores are not performing as well as investors may have thought.<\/p>\n

Pick n Pay\u2019s operating profit margin also raised concerns. At 2.44%, it is significantly lower than Shoprite at 5.76% and Woolworths Food at 7.3%.<\/p>\n

Abraham is also sceptical about the group\u2019s new Ekuseni project, which aims to cut the group\u2019s expenses by R3 billion.<\/p>\n

He said the project is ambitious in certain aspects that would likely be difficult to achieve.<\/p>\n

However, he thinks Pick n Pay is moving in the right direction by continuing to invest in its central distribution infrastructure.<\/p>\n

He further said the Boxer stores have great potential, and the fact that the group indicated it would roll out more of these stores is a positive sign.<\/p>\n

\n

This article was first published by Daily Investor<\/a><\/strong> and is republished with permission.<\/em><\/p>\n

Now read:\u00a0Pick n Pay’s plans to ditch Eskom<\/a><\/h2>\n","protected":false},"excerpt":{"rendered":"

Despite posting what seems like a solid set of results, Pick n Pay’s share price is getting hammered.<\/p>\n","protected":false},"author":341111,"featured_media":463075,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_sma_x_autopost_status":"idle","_sma_x_autopost_error":"","_sma_x_post_id":"","_sma_facebook_post_id":"","_sma_instagram_post_id":"","_sma_threads_post_id":"","_sma_x_attempts":0,"footnotes":""},"categories":[80335],"tags":[82133,35,82131,70974,24394],"class_list":["post-465673","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-investing","tag-alec-abraham","tag-headline","tag-lerena-olivier","tag-pieter-boone","tag-wayne-mccurrie"],"_links":{"self":[{"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/posts\/465673"}],"collection":[{"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/users\/341111"}],"replies":[{"embeddable":true,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/comments?post=465673"}],"version-history":[{"count":1,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/posts\/465673\/revisions"}],"predecessor-version":[{"id":465681,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/posts\/465673\/revisions\/465681"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/media\/463075"}],"wp:attachment":[{"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/media?parent=465673"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/categories?post=465673"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/tags?post=465673"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}