Our opinion on the current state of PIK

Pick 'n Pay, a major player in the retail grocery chain sector, operates 1,858 stores across South Africa and the rest of Africa. The company, established by Raymond Ackerman in 1967, underwent significant revitalization under CEO Richard Brasher from early 2013 until his retirement. Brasher's leadership marked a pivot towards centralizing distribution and revamping store operations, enhancing efficiency and customer pricing, thus reclaiming market position. Unlike its primary competitor, Shoprite, which expanded aggressively into Africa, Pick 'n Pay concentrated on refining its South African operations, a strategy that has shown mixed results due to various challenges including high inflation rates in expansion territories.

Under the returned leadership of Summers, who previously served as CEO, Pick 'n Pay reported a 5.3% sales increase in the 47 weeks leading to January 21, 2024, highlighted by significant growth in its Boxer brand and African operations. However, the company anticipates a decrease of at least 20% in headline earnings per share (HEPS) for the year ending February 25, 2024, citing underperformance in its supermarkets and increased net debt, which rose from R3.8 billion to R7.2 billion within a span of five months.

The company's technical trajectory has been in a long-term decline since 2016, exacerbated by recent challenges. Despite this, Pick 'n Pay's strategic initiatives, including partnerships with Mr. D and Takealot, and plans to separately list Boxer and conduct a rights issue to raise R4bn, indicate potential for future recovery and competitiveness in the online market.

Investors considering Pick 'n Pay should note its solid blue-chip status and potential for improvement as it adapts to ongoing challenges like loadshedding. The proposed capitalization strategies signal the Ackerman family's commitment to maintaining their significant stake and the company's readiness to bolster its financial position. Monitoring for an upward trend break beyond the 200-day simple moving average could provide a timely investment opportunity as the company navigates its strategic realignment.