Pick n Pay shares plunge over 7% as turnaround target is delayed

Pick n Pay delayed a key turnaround target by a year, tempering optimism that had driven the grocer’s stock higher ahead of the results.

The shares surged on Friday after the retailer reported improved earnings guidance. Investors will now weigh management’s warning that the core Pick n Pay supermarket business is only expected to break even on trading profit in fiscal year 2029, a year later than initially targeted.

The retailer said the delay reflects the timing of various initiatives but not a loss of confidence in its strategy. Still, the changed target illustrates the scale of the challenge facing CEO Sean Summers.

His plan follows years of weak performance in the core supermarket division even as discount retailer Boxer continued to gain market share.

Summers has focused on restoring Pick n Pay’s reputation in bakery and butchery as part of efforts to return the chain to its roots as “the fresh-food people.”

Group turnover increased 1.1% to R120 billion in the year through March 1, while Boxer again outperformed with sales rising 9.6% to R46.68 billion. 

The company warned that geopolitical tensions could affect the business through higher oil prices, inflation and currency volatility.

While the impact could not yet be quantified, Pick n Pay said the uncertainty didn’t cast doubt on its ability to continue as a going concern.

The delay in Pick n Pay’s expected turnaround comes despite positivity in the buildup to the company’s results on the back of a strong performance from Boxer.

At a group level, turnover rose by 3.4% to R120.29 billion. This was largely driven by Boxer’s standout 12.3% turnover growth to R46.68 billion, which was offset by the Pick n Pay segment’s 1.6% decline in turnover.

The company said its core segment’s turnover was impacted by its store estate reset programme, which saw the group reduce its number of South African company-owned supermarkets and hypermarkets by a net 13 stores during the period.

While the Pick n Pay segment’s turnover declined, there was some positive momentum for the group’s company-owned supermarkets, which saw like-for-like sales growth of 3.9%.

However, this was not enough to offset weaker performance and higher expenses across the segment, resulting in a deeper trading loss of R953 million. In contrast, Boxer’s trading profit grew to R2.6 billion.

Pick n Pay’s shares have plunged nearly 7% since the JSE opened at 09:00 after the retailer released its results earlier in the morning.

Reported with Bloomberg.