Pick ‘n Pay (JSE: PIK / FRA: PIK): Value Stock Characteristics as South Africa Continues to Deteriorate

by

South African retailer Pick ‘n Pay (JSE: PIK / FRA: PIK) just released earnings that show some green shoots for the future as well managed businesses learn to adapt to deteriorating conditions in South Africa and the vacuum left behind by an increasingly non-existent government.

OVERVIEW:

  • Consumer champion Raymond Ackerman purchased the first four Pick n Pay stores in Cape Town, South Africa in 1967. Since then, the Group has expanded to encompass stores in South Africa, Namibia, Botswana, Zambia, Swaziland and Lesotho. In addition, Pick n Pay owns a 49% share of Zimbabwean supermarket chain, TM Supermarkets.
An Overview of our Store Estate
  • The Group operates through multiple store formats under three brands – Pick n Pay, Boxer and TM Supermarkets. Pick n Pay also operates one of the largest online grocery platforms in sub-Saharan Africa.
  • Focuses on groceries, clothing and general merchandise plus additional value-added services.

At a Glance

Business Model
  • Pick n Pay’s dire picture of operating conditions in SA sinks its shares 9% (IOL) May 2023
    • Pick n Pay’s shares ended the day 9% lower as the market digested the worrying picture the retailer portrayed of operating in South Africa and the increased hardships and reality of running a massive consumer-based business amid the worst energy crisis the country has faced.
    • Anchor Capital investment analyst Zinhle Mayekiso: “The retail sector in South Africa is currently navigating a tough economic environment and is also having to contend with increased energy costs due to elevated load-shedding levels. The combination of these headwinds is weighing on profitability, which has resulted in weakened share price performances from most retail counters on the JSE.”
    • Mayekiso said the Pick n Pay’s strategy was a step in the right direction in improving Pick n Pay’s competitive positioning in South Africa’s food retail landscape.
    • “Having a more targeted retail offering to different consumer demographics in South Africa is starting to yield some green shoots for Pick n Pay but the implementation of the Ekuseni strategy is still ongoing,” she said.
  • Pick n Pay’s Ackerman lambastes SA government for failing to fix energy crisis (IOL) May 2023
    • Ackerman said Pick n Pay has absorbed much of the cost inflation, particularly on basic commodities by saving costs in its business while spending around R60 million per month on diesel.
    • He said that 37% of the cost of each litre of diesel was going into government coffers and the Road Accident Fund as a windfall tax, but requests by the retail industry to be included in the government’s diesel rebate package had so far fallen on deaf ears.
    • As a result, Ackerman said they could not insulate consumers entirely from the impact of the energy crisis, as no company could absorb these costs indefinitely, given the scale of the investment needed to keep the power on and stores open.
    • Bahlmann said business now had to make its voice heard on the global stage that it will solve South Africa’s problems, with or without government, just as ordinary citizenry were increasingly bypassing government in almost every area of life.
  • Elevated risk of social unrest relating to food if load shedding gets too intense, warns Ackerman (IOL) May 2023
    • Gives 7 key points that Ackerman highlighted as their successes for the period.
  • Pick n Pay share price falls to lowest level in nearly 10 years (Business Day) May 2023
    • The retail group lowers payout ratio after a tough year amid ongoing load-shedding and the Ekuseni plan
    • It declared a final dividend of 140.30c, bringing the total payout to 185.15c, down 16.3% year on year.  
    • The retailer also announced it will cut its future dividend payout ratio so that it keeps more cash on hand for load-shedding mitigation and Ekuseni.
  • P/E (Google Finance): 13.31 / Trailing P/E (Yahoo! Finance): 15.44 (no forward P/E)
  • Dividend Yield (Google Finance): 6.06% / Forward Dividend & Yield (Yahoo! Finance): 5.59% (NOTE: I suspect the Dividend may need to be temporarily trimmed or suspended)

1 YEAR CHART:

LONG TERM CHART:

ADDITIONAL RESOURCES:

Share

Subscribe Now Via Substack

Logo

Disclaimer. The information and views contained on this website and newsletter is provided for informational purposes only and does not constitute investment advice and/or a recommendation. Your use of any content is entirely at your own risk and it is your sole responsibility to evaluate the accuracy, completeness and usefulness of the content. Seek a duly licensed professional for any investment advice. I may have positions in the investments covered. This is not a recommendation to buy or sell any investment mentioned.

Similar Posts:

Leave a Comment

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Visit Us On TwitterVisit Us On FacebookVisit Us On LinkedinCheck Our FeedVisit Us On Instagram