It’s true – Pick n Pay are mopping the floor with Shoprite.

The latest financials for the six months up until June have now been released, and it wasn’t exactly a stellar half-year for Shoprite.

In fact, according to Gryphon research analyst and portfolio manager Casparus Treurnicht, the update was “horrible”.

Yesterday they reported that turnover had risen only 3,3%, to R145,6 billion, for the six months up until June. That’s still a whopping figure, but analysts reckon that Pick n Pay has been snatching up some of their market share.

Business Insider reports:

Pick n Pay’s South African sales grew by 8% in the three months to end-February.

After bleeding customers in recent years, Pick n Pay has reduced its labour force by a tenth and streamlined operations. It has also invested in logistics and new stores, and within six months, over R1 billion had been extended to new Pick n Pay credit card holders. And in the past year, Pick n Pay invested R500 million in price cuts to become more competitive.

“I believe Shoprite took some strain due to Pick and Pay getting more competitive but just as important, Shoprite suffering from a much weaker than expected economy,” says Treurnicht.

On the back of the six-month financials, Shoprite’s share price took a tumble. Yesterday was rough, especially just after lunch:

If you examine the share price across the past year, it’s less drastic, but there is still reason to worry:

Treurnicht thinks that the share, which is still trading at a price-earnings ratio of more than 20 times, is still expensive.

“I think we’ll see the retail sector sell off in general but also Pick n Pay starting to outperform Shoprite. Pick n Pay grew sales between 5% and 5.5% consistently over each half for the last two years. It seems [Pick n Pay CEO Richard] Brasher has a clearly-defined strategy.”

It’s a bunfight out there.

[source:businsider]