Pick n Pay shares hit by results

Pick n Pay’s share price has retreated just more than 13% in the past month, with most of the movement sparked by the release of its 2017 annual results.

Pick n Pay’s share price has retreated just more than 13% in the past month, with most of the movement sparked by the release of the company’s 2017 annual results.

Figures from Iress, a data and technology supplier for financial markets, show that on April 19 — the day the results were released — about 12-million shares with a market value of R750m were traded.

This was far higher than the April monthly average volume of about 2.6-million.

On the day of the retailer’s financial results, the share price ended the day down 4.4% after the retailer’s earnings missed expectations. It closed higher at R63.39 on Monday.

Earnings excluding one-time items rose 17% to R2.58 a share for the 52 weeks ending February, lower than a median estimate of 14 analysts of R2.67, according to Bloomberg.

Headline earnings rose 18%, but expectations had been for earnings to rise more than 20%. Like-for-like sales were up 3.4%, against an internal selling price inflation of 6.1%. This implied volume declines on a per store basis.

Kagiso Asset Management associate portfolio manager Simon Anderssen said Pick n Pay’s share price still implied strong future earnings growth.

Lentus Asset Management chief investment officer Nic Norman-Smith said Pick n Pay’s share price was still high despite the continual improvement of the business.

“Even after the sell-off, we don’t find the share price particularly attractive at current levels,” he said.

Of 16 Bloomberg analysts, three have it as a buy, nine as a hold and four as a sell.

While local grocers have in general seen a decline in their share prices in the past month, Pick n Pay has been the hardest hit. Shoprite is down 0.65%. Spar has slid 1.89%.

Retailers have increasingly turned to discounts to try to lure customers to their stores. Over the past two years, retailers have had to face the challenges presented by the local and global economic climate, rising prices, low consumer confidence and declining disposable incomes.

Pick n Pay noted that during the period under review, consumers had turned to smaller shops compared with the bigger, once-a-month grocery run.

Meanwhile, a Nielsen study found that customers in SA were reacting to the tight economy by buying only essentials, cutting down on luxuries and switching to cheaper brands.

EVEN AFTER THE SELL-OFF, WE DON’T FIND THE SHARE PRICE PARTICULARLY ATTRACTIVE AT CURRENT LEVELS