Our opinion on the current state of PIK

Pick 'n Pay (PIK) is a retail grocery chain with 1858 stores, mostly in South Africa, but also in the rest of Africa. The company was started by Raymond Ackerman in 1967 and became the dominant grocery retailer over time, before being displaced by Shoprite/Checkers. Pick 'n Pay was in a slump when Richard Brasher took over as CEO in early 2013. Since Brasher took over, the company has been steadily improving, but he has now retired. He has set in motion a centralisation of distribution which is now beginning to have a significant impact on efficiency and prices. He has also implemented a store roll-out and a revamping of existing stores which is bringing customers back to the chain. In 2018 he implemented a voluntary severance program (VSP) which has seen 3500 employees leave the company at a once-off cost of around R250m. The essential difference between Brasher's strategy and that of his main rival, Shoprite, has been that he has focused on making the South African operation more efficient and winning back customers through good pricing. Shoprite, on the other hand, has expanded aggressively into Africa and that has not always been beneficial as shown by the fact that it has now been forced to abandon Nigeria and the high inflation rate in Angola has become a distinct problem for Shoprite. In its results for the 52 weeks to 26th February 2023 the company reported group turnover up 8,9% and headline earnings per share (HEPS) down 1,3%. The company said, "Despite spending an incremental R522 million on diesel to run generators (R430 million net of electricity savings), and incurring planned costs in implementing the Ekuseni plan, the Group managed to hold year-on-year trading expense growth to just 11.9%, as a result of gains from Project Future cost-saving initiatives". In a trading statement for the 20 weeks to 16th July 2023 the company estimated that HEPS would fall by more than 20%. The drop in HEPS, which could cause the company to report its first ever interim loss, was caused by the cost of diesel to run generators, duplication of supply chain costs during the Longmeadow/Eastport handover and restructuring costs. The company said, "The estimated incremental abnormal costs for H1 FY24 highlighted above cumulatively total R610 million". In a trading statement for the 26 weeks to 27th August 2023 the company estimated that it would make a headline loss of between 129,82c and 149,36c compared with a profit of 97,62c in the previous period. The company also announced that Pieter Boone will resign as CEO and be replaced by Sean Summers with immediate effect. Summers previously worked for Pick n Pay as CEO between 1999 and 2007. Technically, Pick 'n Pay has been in a downward trend since 2016 and has recently lost ground to Shoprite. On the latest results, it remains in a steep long-term downward trend. It is a solid blue-chip company that will probably perform better once it adjusts fully for loadshedding. The link up with Mr. D and Takealot should help the company to catch up in the online shopping market.