Shoprite versus Pick n Pay

Daily Investor’s analysis of Pick n Pay and Shoprite shows that the latter achieved a much better performance, which is behind its superior share price performance.

Pick n Pay recently published its financial results for the year ended 26 February 2023, which disappointed the market.

Turnover increased by 8.9%, but trading expenses increased even more. It resulted in a significant decline in profit.

As a result of lower profits, Pick n Pay cut its dividend by 16.3% to 185.15 cents per share – down from 221.15 cents last year.

It sent the share price plummeting 9% on the day to the lowest level in nearly a decade.

To put Pick n Pay’s financial results into perspective, Daily Investor compared it to Shoprite’s comparable performance.

Over the past year, Pick n Pay’s revenue increased by 8.3% and its net income decreased by 3.7%. Shoprite, in comparison, increased revenue by 17.2% and net income by 14.8%.

When increasing the time horizon to 15 years, Shoprite still outperformed Pick n Pay.

Shoprite achieved an average annual revenue growth of 10.3% and average net income growth of 11.08%. Pick n Pay, in comparison, only achieved 6.23% and 5.84%, respectively.

Comparing the current ratio of both retailers, which considers the firms’ ability to pay off short-term liabilities with short-term assets, Shoprite again proved to be in a stronger position.

Shoprite can cover its short-term liabilities 1.27 times with its short-term assets. Pick n Pay can only cover their short-term liabilities 0.74 times.

The same goes for their cash ratios. Shoprite can cover its short-term liabilities 0.27 times with only cash, and Pick n Pay can only cover them 0.08 times with cash.

Shoprite was also stronger in net income (3%) and operating profit margins (5.65%). However, Pick n Pay generated a higher return on equity than Shoprite.

Shoprite further reigned supreme in solvency. It can cover its interest expense on debt 3.52 times with its operating profit, while Pick n Pay can cover its interest expense only 1.72 times.

Over the past year, Shoprite has grown its equity by 12.9%, while Pick n Pay’s equity decreased by 0.35%.

The financial comparisons show that Shoprite is in a much better financial position than Pick n Pay regarding its liquidity and solvency. Shoprite also performs better in its profitability.

It explains why Shoprite’s share price significantly outperformed Pick n Pay’s and why it trades at a much higher price-to-earnings (P/E) ratio than Pick n Pay.

MeasureShopritePick n Pay
Short-term growth – –
Revenue growth17.20%8.30%
Net income growth14.70%-3.67%
Long-term growth – –
Average annual revenue growth rate (15yr)10.27%6.23%
Average annual net income growth rate (15 yr)11.08%5.84%
Liquidity – –
Cash ratio0.270.08
Current ratio1.230.74
Profitability – –
Net margin3.00%1.07%
Operating margin5.65%2.79%
Solvency – –
Interest coverage3.521.72
Equity growth12.90%-0.35%