Pick n Pay punished for poor performance

Pick n Pay’s share price plummeted 14% after it released its financial results for the 26 weeks that ended on 27 August 2023 – its worst set of results since listing.

The retailer reported revenue growth of only 5.5% and a net loss of R571 million, a 226% decrease from the year before.

In the past 30 years (as far as our data goes), Pick n Pay has never reported a loss. Even though investors were expecting poor results, it was even worse than expected.

The company had many excuses for its disastrous reporting period, including load-shedding, which cost it millions.

Pick n Pay said load-shedding impacted its growth and affected its ability to advertise in the market. The R396 million it paid for diesel was the main cause for these impairments.

The unfortunate fact of the matter is that all food retailers are experiencing the same impact of load-shedding.

Spar, for example, reported in its 2023 interim results that it had spent an additional R700 million on diesel due to load-shedding.

Likewise, Shoprite has reported a R1.3 billion diesel bill across all its stores for the 2022 financial year.

However, these obstacles have not prevented Spar and Shoprite from reporting relatively strong results.

Shoprite reported a 17% increase in revenue for the second half of the 2023 financial year. Spar’s recent trading update reported an 11% increase in revenue.

Pick n Pay’s performance is much worse than its competitors and shows that the company’s leadership and strategy did not perform well.

The market did not like what it saw. Pick n Pay’s share price plummeted over 14% on Wednesday morning.

The chart below shows Pick n Pay’s share price in 2023.

New Pick n Pay chief executive

Pick n Pay chairman Gareth Ackerman said despite the country’s challenges, the group’s result is extremely disappointing.

“The performance of our core Pick n Pay business has not met expectations,” Ackerman said.

Pick n Pay’s disappointing performance saw the board replace former chief executive Pieter Boone with an old hand, Sean Summers.

Summers returned to Pick n Pay after successfully leading the company from 1999 to 2007. He was appointed as CEO on 30 September 2023.

Looking at the Pick n Pay results under Boone shows why the board decided to bring Summers back to turn the retailer around.

The chart below shows Pick n Pay’s earnings since Boone took the reigns in 2021.