Pick ‘n Pay (PIK) – Need to maximise customer spend

While PIK delivered strong HEPS growth of 22.2% in 1H17, we were disappointed by the weak topline growth. We calculate that, excluding the higher growth Clothing and Boxer divisions, and adjusting for its franchise component, the core Pick ‘n Pay corporate stores’ turnover growth may have been only 5.2% y-y. We show that PIK are competitively priced, and we do not think PIK is losing market share from customers shopping away from them. Instead, we attribute the weak topline growth to PIK customers trading down to cheaper product within its chains, as well as out-of-stocks which result in lost sales opportunities and PIK not maximizing the spend of its customers.