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Pick n Pay loses its spark
Pick n Pay loses its spark

Pick n Pay loses its spark

RETAILER NEWS

IOL Business - Oct 20th 2014, 11:44

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 percent to R261.9 million in the six months through August, while same-store sales growth climbed 4 percent, the Cape Town-based company said in a statement yesterday. Pick n Pay raised the interim dividend 32 percent 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 percent,” Alec Abraham, an analyst at Sasfin Securities, said. “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 percent have constrained spending. Shoprite, 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 spiralled and market share fell.

“I’m always happier if underlying like-for-like volumes are up,” he said.

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”.

Pick n Pay shares dropped as much as 6.5 percent, the biggest intraday decline since October 5, 2012, and closed 2.42 percent lower at R51.70 yesterday. The stock has lost 2.4 percent this year, compared with a 19 percent decline at Shoprite and a 6.8 percent 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 R110m rand improving existing stores.

The company plans to set up more than 80 new outlets in the second half, accelerating its store-opening programme, the food retailer said.

The company’s like-for-like sales in Africa outside its home market climbed 7.8 percent.

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”.From © Independent On-line 2013. All rights reserved. 

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