Pick n Pay’s perpetual pain

The retailer, its blue-chip status long since faded, raises fresh doubts about a turnaround plan that never comes to fruition with its latest results

● Pick n Pay’s share price performance this year has probably shredded any hope that the chain might be on track to reclaim its crown as the country’s pre-eminent retailer.

That title was long ago bestowed on rival Shoprite, but Pick n Pay’s fall from top spot in the early 2000s has since defined its place in local investment portfolios. And since the release of unimpressive yearend numbers last week, its share price has crumbled almost 15%, taking its year-todate decline to 36% a nine-year low. Contrast that with Spar’s 18.7% gain and Shoprite’s 7% wobble.

The biggest problem is that Pick n Pay has a stubbornly lower operating margin than its peers, which makes it particularly vulnerable to external shocks such as load-shedding. The retailer is looking at annual costs of R1bn if load-shedding continues at current levels; it spent R522m just to keep business going in the year to endFebruary. That was half its profit after tax of

R1.1bn. Group profits would have risen 7% had it not been for the blackouts; instead, they dropped 15%.

While turnover rose 8.9%, with its key Boxer division showing sales growth of 20.2%, Pick n Pay’s headline earnings ended 16.3% lower. Worse, the group warned that next year’s earnings may be no better, depending on how bad loadshedding gets. It slashed its dividend cover by more than 16%.

Operationally, things could hardly be tougher; now shortages of food across certain categories could be on the cards thanks to load-shedding, warns CEO Pieter Boone.

“When stage 8 happens, that will impact food supply availability and we will see in certain categories suppliers not able to meet the high demand,” he says. Bread supplies have already been hit.

“That is really a plea to the government to stand up and act decisively. We lack leadership at the moment.”

Besides its diesel spend, Pick n Pay has committed at least R200m for an energy resilience plan to find new lighting and refrigeration solutions.

Several market commentators have concerns about the retailer’s Ekuseni programme, which includes converting some Pick n Pay stores to the new low-cost