Pick n Pay (PIK) – Another new dawn

PIK launched a new strategic plan which aims to deliver 10% CAGR in sales over the next four years and improve its PBT to 3% by FY26. The plan includes a refinement of the Pick n Pay (PnP) chain’s offering, which was deemed to be too broad in its market approach. We agree with this assessment, but highlight issues that could present some complications. These include a large franchise base that does not form part of the repositioning. We think the drastic cuts in the range could hamper efforts to regain market share in the higher-income segments. All three leaders of PIK’s major segments are from the Boxer stable, and we think their hard-discount retail experience may influence the direction of PIK’s middle-market and higher-income store formats. Some of these influences are already apparent in the Project Red trial stores.

Boxer’s ambitious rollout plan could see its store numbers match the Shoprite chain by FY26. However, future rollouts may be in more competitive areas and trading densities could be lower. Our analysis shows that the planned doubling of Boxer sales by FY26 underpins PIK’s 10% CAGR topline growth target, as the other PIK segments only need to grow at 7.1% CAGR, by our estimates.

We find the service agreement with Takealot’s Mr D peculiar. Mr D typically charges sellers a commission, which restaurants often recover by marking up their prices on the app. PnP’s prices on the app will be the same as in stores, and the commissions could reduce its online GPM.

Ultimately, the success of the new strategy will depend on its execution, as PIK have made similar attempts before.