Pick n Pay | A threat to Shoprite?
FY'19 was Pick n Pay's (PIK) strongest trading performance in over five years as like-for-like volumes grew by 5% yoy. A combination of effective promotional activity, competitive pricing and effective inventory management have led to significant market share gains for PIK in FY '19. We note there was an acceleration of like-for-like volume growth from 3.5% in H1 '19 to c.6.5% in H2 '19. Strikes at its direct peer's, Shoprite (SHP), largest distribution centre (in Gauteng) and IT issues led to a drop in on-shelf availability and c.R1bn of lost sales over the last six months, partly explaining PIK's H2 ‘19 excess volume growth. SHP are resolving their product availability issues, with a notable acceleration on sales growth thus far. We are weary that SHP's c.10% lower average price points will lead to a bounce-back of volumes at SHP over the next six months, which will hinder PIK's near term sales growth momentum.Pick n Pay is an investment holding company. Co. has two operating segments, namely South Africa and Rest of Africa. Co. provides food, non-edible groceries, clothing, liquor and tobacco, health and beauty products, building and hardware and general merchandise. Co.'s offer also includes additional services such as financial transactions at till points (including mobile money), ticketing services and the sale of gift cards. In addition to manufacturer-branded products, Co. has a number of Pick n Pay and Boxer private label products to suit every budget. Co. operates on both an owned and franchise basis. Co.'s stores range from hypermarkets to small convenience stores.
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