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.
|Measure||Shoprite||Pick n Pay|
|Net income growth||14.70%||-3.67%|
|Average annual revenue growth rate (15yr)||10.27%||6.23%|
|Average annual net income growth rate (15 yr)||11.08%||5.84%|