Pick n Pay will on Tuesday release it’s half-year results to August 28, breaking down the turnover of its two divisions separately for the first time, following calls by investors for better disclosure.
The transparency is likely to please the market, and may give some insight into how poorly the Pick n Pay brand has been doing, while its discount brand Boxer has, by contrast, been responsible for its sales growth.
There have been many analysts and others “whispering” in the market that the corporate Pick n Pay grocery brand, of 392 stores, has been running at a loss. It is not clear exactly how much the results will say about Pick n Pay’s corporate store performance, however, as the information will include the results of the 256 clothing and 282 liquor businesses.
Its clothing business has stolen market share for four years running according to its most recent annual report.
The results will show the percentage by which clothing sales have grown.
Sasfin equity analyst Alec Abraham said: “A divisional breakdown from Pick n Pay will be highly instructive for equity analysts to better assess the true relative performances of the national food retailers.
“We anticipate that it will verify our long-held suspicion that Pick n Pay’s legacy corporate stores have lost market share and underperformed for some time.
“This is as Checkers has aggressively opened stores in Pick n Pay’s upper-income historical strongholds and Woolworths has, in our opinion, continued to offer a markedly superior offering and shopping experience to both of these larger peers.”
Pick n Pay said in a trading statement on August 28: “Sales growth was primarily driven by a strong performance from Boxer”.
In an April trading update, it again referred to Boxer in very positive terms, explaining the discount brand’ “is continuing to delight customers”.
Boxer has a total of 368 company stores including 226 supermarkets, 28 building, 97 liquor stores and 17 smaller Punch stores, according to the latest annual report.
Other reasons, analysts believe the corporate store brand is underperforming, is that the group’s operating margin is just under 3%. This is below peers. Woolworths Foods’s operating margin is 7.3% in its latest financials and Shoprite Checkers is at 6%.
Under its new strategy dubbed Ekuseni, Pick n Pay is focusing on two distinct markets — with a lower-income store under the brand name Qualisave and higher-income Pick n Pay chain. It is rebranding and upgrading stores and instituting a better focus on distinct customer groups. The initial results are “encouraging” it said in the August update. But the company says the new stores do not yet constitute a “substantial enough proportion of the estate to meaningfully impact the overall performance” of the Pick n Pay brand in these interim results.
All in all, just how much Pick n Pay has been struggling may become a little more clear on Tuesday. Although if the new strategy and a focus on Boxer’s expansion couple with a decent increase in earnings, investors may not be concerned.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.