Pick n Pay (PIK) – On the right track

With PIK showing positive trends in topline growth, we find the recovery in the corporate stores to be encouraging. Our analysis suggests the VSP program has been effective in curbing staff costs, but we expect staff costs could rise as PIK rolls out corporate stores faster than franchise stores. We argue that PIK’s segmental disclosure could improve as we estimate at least three of their divisions exceed the 10% threshold for disclosure, and have significantly different economics. Considering SHP’s repurchase of its deferred shares, we review the terms of PIK’s unlisted B-shares and assess whether a similar situation could play out with PIK. While there are some similarities, a key difference is that PIK’s B-shares are transferable.