Pick n Pay Stores Limited’s (JSE: PIK) 2024 journey has been bumpy, mirroring the turbulent South African economic landscape. With the share price at R23.38 (as of February 1, 2024), showcasing a year-to-date change of -1.31%. The recent trading trend has been mixed, with January 2024 showing a 0.39% increase, following a 2.14% decrease in December 2023 and a 4.72% drop in November 2023.
While reporting positive same-store sales growth, rising input costs and inflation squeeze profitability. The ongoing debt restructuring sparks mixed reactions, and the competitive landscape remains fierce. Macroeconomic headwinds, including high inflation and interest rates, further dampen the outlook. Despite improved financial performance in FY23, the share price struggles. The reinstated dividend (5.71% yield) offers some solace, and its value-driven approach resonates with cost-conscious consumers. Expansion into new markets holds promise, but broader market sentiment and competition from discounters weigh heavily.
Internally, leadership changes orchestrated by Sean Summers aim to stabilize the core grocery retail business. The market, sceptical of the turnaround narrative, has already pushed the share price down over 37% in the past six months. The government’s potential efforts to minimize blackouts could offer relief on operational costs.
Technical
The 1-day chart paints a concerning picture. The share price trades below both the 100-SMA (orange line) and 200-SMA (red line), recently breaking above the 50-SMA (blue line) but struggling to find support. The RSI, though above 50, is falling sharply, indicating waning bullish momentum.
With the price action seemingly finding resistance at the 23.60% Fibonacci retracement level above, a pushback below the 50-SMA would leave the R20.22 support level firmly in play. A break below the initial support on significant volume could confirm the bearish momentum, leaving the R17.47 price level as the next likely level of significance in the short term.
However, a sustained push above the 23.60% Fibonacci retracement level opens the path to the 38.20% Fibonacci retracement level (R27.09). Confirming the recovery requires overcoming challenges at the 50.00% Fibonacci retracement level (R29.22) and the 61.80% Fibonacci retracement level (R31.34).
Summary
Pick n Pay’s outlook hinges on navigating economic challenges, executing its turnaround strategy, and attracting new customers. Technically, the stock faces resistance at the 23.60% Fibonacci retracement level, with a potential downside towards R17.47. While a break above 23.60% Fibonacci retracement level could signal recovery, significant hurdles lie ahead.
Sources: TradingView, Trading Economics, Pick N Pay, MoneyWeb.
Piece written by Mfanafuthi Mhlongo, Trive Financial Market Analyst
Disclaimer: Trive South Africa (Pty) Ltd (hereinafter referred to as “Trive SA”), with registration number 2005/011130/07, is an authorised Financial Services Provider in terms of the Financial Advisory and Intermediary Services Act, 37 of 2002. Trive SA is authorised and regulated by the South African Financial Sector Conduct Authority (FSCA) and holds FSP number 27231. Trive Financial Services Ltd (hereinafter referred to as “Trive MU”) holds an Investment Dealer (Full-Service Dealer, excluding Underwriting) Licence with licence number GB21026295 pursuant to section 29 of the Securities Act 2005, Rule 4 of the Securities Rules 2007, and the Financial Services Rules 2008. Trive MU is authorized and regulated by the Mauritius Financial Services Commission (FSC) and holds Global Business Licence number GB21026295 under Section 72(6) of the Financial Services Act. Trive SA and Trive MU are collectively known and referred to as “Trive Africa”.
Market and economic conditions are subject to sudden change which may have a material impact on the outcome of financial instruments and may not be suitable for all investors. Trive Africa and its employees assume no liability for any loss or damage (direct, indirect, consequential, or inconsequential) that may be suffered. Please consider the risks involved before you trade or invest. All trades on the Trive Africa platform are subject to the legal terms and conditions to which you agree to be bound. Brand Logos are owned by the respective companies and not by Trive Africa. The use of a company’s brand logo does not represent an endorsement of Trive Africa by the company, nor an endorsement of the company by Trive Africa, nor does it necessarily imply any contractual relationship. Images are for illustrative purposes only and past performance is not necessarily an indication of future performance. No services are offered to stateless persons, persons under the age of 18 years, persons and/or residents of sanctioned countries or any other jurisdiction where the distribution of leveraged instruments is prohibited, and citizens of any state or country where it may be against the law of that country to trade with a South African and/or Mauritius based company and/or where the services are not made available by Trive Africa to hold an account with us. In any case, above all, it is your responsibility to avoid contravening any legislation in the country from where you are at the time.
CFDs and other margin products are complex instruments and come with a high risk of losing money rapidly due to leverage. You should consider whether you understand how these products work and whether you can afford to take the high risk of losing your money. Professional clients can lose more than they deposit. See our full Risk Disclosure and Terms of Business for further details. Some or all of the services and products are not offered to citizens or residents of certain jurisdiction
