Pick n Pay Share Price JSE: PIK Faces Reality Check on Core Earnings Weakness as Losses Persist
Pick n Pay’s interim report highlights the ongoing challenges in its turnaround plan as profitability remains elusive.
Quick overview
- Pick n Pay's interim report reveals ongoing challenges in its turnaround plan, with persistent losses despite some operational improvements.
- The retailer's core grocery division remains unprofitable, heavily impacted by store closures and rising food prices amid weak consumer demand.
- Boxer, Pick n Pay's discount brand, continues to drive profits, but the overall financial recovery is hindered by structural inefficiencies and high costs.
- Despite a narrowing of losses and some positive indicators, investor sentiment remains cautious as the company navigates a challenging economic landscape.
Pick n Pay’s interim report highlights the ongoing challenges in its turnaround plan as profitability remains elusive.
Pick n Pay’s Struggles Deepen as Losses Persist Despite Boxer’s Strength
South Africa’s second-largest grocer faces mounting pressure as store closures, weak consumer demand, and rising food prices weigh on its turnaround efforts.
Persistent Losses Amid Restructuring Efforts
On Monday, 27 October, Pick n Pay released its interim results for the 26 weeks ended 31 August 2025, marking the first half of its 2026 financial year. The report confirmed that the retailer remains in the red, with nearly 60 store closures dragging turnover lower.
CEO Sean Summers reiterated that the company’s turnaround plan would take time to yield results, acknowledging that another year of losses lies ahead despite signs of operational progress.
The group’s performance was heavily influenced by Boxer, its fast-growing discount brand, which continues to act as the main profit driver. Pick n Pay still holds a majority stake in Boxer, even after its separate listing in 2024, and has benefited from the division’s steady expansion and resilient margins.
Unprofitable Core Business Still a Concern
Despite modest improvement, Pick n Pay admitted that its core grocery division remains unprofitable at the trading profit level. Management highlighted that while recapitalisation and debt relief have supported stability, the group is still grappling with structural inefficiencies, high costs, and intense price competition.
The retailer said that it is committed to restoring profitability through operational streamlining, store optimization, and improved pricing strategies—but these efforts are unlikely to deliver immediate financial recovery.
Market Reaction and Share Price Volatility
Following the release, Pick n Pay’s share price dropped over 6%, sliding from R32.9 to R30.4 before a modest rebound. The sell-off underscores growing investor unease as losses persist.
PIKJ Chart Weekly – MAs Are Turning Into Support
The stock’s longer-term picture is equally challenging. Since peaking near 8,300 ZAC in 2018, the share has fallen roughly 80%, bottoming around 1,855 ZAC in 2022 before staging a temporary rebound in 2024. Recent gains were erased as disappointing results reignited selling pressure.
PIKJ Chart Monthly – The 20 SMA Holding Is A Positive Signal
Despite this, some technical indicators had recently turned positive—October’s rally of 30% from the 50-week SMA suggested renewed buying interest. However, the latest earnings report halted that momentum, once again highlighting how sentiment remains fragile.
Pick n Pay Narrows Losses as Turnaround Efforts Gain Traction
The South African retailer shows early signs of recovery as cost control, recapitalisation benefits, and Boxer’s growth drive a sharp improvement in interim results.
Stronger Financial Performance
- Pick n Pay’s interim results for the six months ended 31 August 2025 reflected a significant improvement in performance, with the headline loss narrowing to R439 million, down from R804 million a year earlier.
- The improvement was underpinned by a R227 million increase in trading profit and a R537 million positive net funding interest swing, stemming from the FY25 recapitalisation, which has now fully benefited Group earnings.
Revenue and Profitability Trends
- Group turnover rose 4.9%, supported by 13.9% growth in Boxer and a modest 0.1% increase in the Pick n Pay segment (4.4% on a like-for-like basis).
- Gross profit margin expanded from 0.3% to 18.2%, mainly due to the Pick n Pay segment’s margin recovery.
- Other income improved 4.5% year-on-year, further supporting the Group’s profitability.
Segment Performance and Cost Management
- Boxer continued to outperform, posting a trading profit of R931 million, up 16.2%, while the Pick n Pay division recorded a trading loss of R621 million, though this reflected a 13.5% improvement.
- Trading expenses rose 4.8%, largely linked to Boxer’s rapid store rollout and expansion initiatives.
- Overall, Group trading profit surged 273.5% to R310 million, highlighting the positive operating leverage from the recapitalisation.
Financial Structure and Debt Reduction
- Net finance costs dropped 44.8% to R627 million, thanks to lower borrowing costs and improved funding terms.
- While lease interest increased 3.9%, this was primarily due to Boxer’s expansion—partially offset by cost reductions within Pick n Pay.
- The loss before tax and capital items was trimmed by nearly 70% to R317 million, versus R1.1 billion in the previous period.
Improved Bottom Line and Outlook
- After accounting for capital items and the 34.4% Boxer non-controlling interest, the attributable loss after tax recovered by 40%, reducing to R496 million from R827 million.
- The company noted that, on a full-year FY26 basis, the Pick n Pay segment’s trading loss is expected to remain broadly in line with FY25, reflecting continued stabilization but not a full turnaround yet.
Economic Strain and the Cost-of-Living Squeeze
Pick n Pay’s challenges are unfolding against the backdrop of South Africa’s worsening cost-of-living crisis. Over the past few years, food prices have surged between 30% and 300%, far outpacing headline inflation. This has severely hit lower-income consumers, forcing them to cut spending or switch to discount alternatives.
Traditional supermarkets like Pick n Pay have struggled to compete with low-cost rivals due to their high operational expenses and limited pricing flexibility. The company’s reliance on middle-income shoppers—now under financial strain—has further eroded sales momentum.
JSE Hits Record High, But Retail Sector Lags
Ironically, South Africa’s JSE All Share Index has recently touched record highs, buoyed by stronger mining and banking stocks. Yet, retailers such as Pick n Pay have missed the rally, dragged down by weak consumer sentiment and profitability challenges.
While Boxer’s growth continues to offer a silver lining, the performance gap between the two divisions highlights the scale of Pick n Pay’s internal imbalance. The group’s turnaround plan has begun showing traction but remains far from complete.
Conclusion: Hopeful Strategy, Harsh Reality
Pick n Pay’s interim report paints a mixed picture: tangible progress from Boxer and recapitalisation efforts, but persistent weakness in its core operations. The company is stabilizing financially but not yet recovering, as macroeconomic pressures and structural inefficiencies continue to weigh on results.
Investors may take comfort in management’s discipline and improving margins, but until Pick n Pay proves it can generate sustainable profits from its main business, the turnaround story remains a work in progress.
- Check out our free forex signals
- Follow the top economic events on FX Leaders economic calendar
- Trade better, discover more Forex Trading Strategies
- Open a FREE Trading Account
Save