Pick n Pay shrugs off retail woes

As Shoprite has stumbled, analysts are impressed by its rival’s performance in a very difficult market

It’s been a good while since Pick n Pay has had an edge over its slick rival Shoprite, which over the years has largely come out ahead.

Until this year, that is.

Shoprite got knocked by the problematic implementation of its new IT system, a labour dispute at one of its service providers and a drop in turnover at some of its cross-border operations.

It was not helped by a difficult economy, which limited the spending power of local consumers. The severity of the downturn could be seen in Shoprite saying school supplies outsold toys over the Christmas period.

The result was a revenue rise of just 2.6% to R77.54bn, net profit falling 22.4% to R2.26bn and basic earnings per share slumping 21.9% in the six months to December.

For its part, Pick n Pay put out a trading update last week showing that it had shrugged off the troubled economy. Revenue is expected to rise by as much as 9.6% for the 53 weeks to end-march. Headline EPS are seen to be 20%30% higher.

On the whole, analysts are impressed by

Pick n Pay’s performance in a very difficult market.

“The trading statement highlighted a very strong performance. With sales and comparable store sales outperforming listed peers, it’s safe to say that it has gained market share,” says Argon equity analyst Bjorn Samuels.

Gryphon research analyst and portfolio manager Casparus Treurnicht agrees with Samuels that Pick n Pay managed to take market share.

He thinks Shoprite was the main loser, as it was distracted by its IT and labour problems. “With Shoprite management’s focus directed to these issues — and let’s not forget about its problems in Angola — it is quite understandable