Pick ‘n Pay (PIK) – How to break the 5% margin barrier

We address the question of how much margin improvement is available to PIK following its strong FY16 results. A segregation of the corporate stores and franchise businesses reveals the extent of inefficiencies in the corporate business and we believe that closing the gap in trading densities between corporate and franchise stores, as well as lowering staff costs and occupancy costs in corporate stores could deliver a 4.5% pre-tax margin. Adding in the profit contribution of the steadily growing clothing business, we estimate PIK could comfortably achieve a 5.6% net margin.