Pick N Pay Stores Ltd (JSE: PIK) has faced substantial challenges, reflected in its disappointing financial performance for the first half of the fiscal year. The company reported a pro forma loss before tax and capital items of R837.2 million, attributing this setback to increased costs from load shedding and intensified competition. Consequently, the trading profit suffered a staggering 97.5% decline, reaching only R31.8 million compared to the previous year’s R1.25 billion, helping share decline over 15% post-earning and resulting in a year-to-date decline of over 57%.
Despite these challenges, there have been encouraging signs, particularly from the Boxer South Africa division, which contributed significantly to the group’s 5.4% increase in turnover. Online sales, value-added services, and the Rest of Africa segment have shown positive growth.
The company’s strategic re-evaluation under new CEO Sean Summers aims to return the core supermarket business to growth and profitability while focusing on customer service, execution in supermarkets, and enhancing supplier engagement.
Technical Analysis
On the 1-day chart, Pick N Pay’s price action is contained within a descending channel pattern, signalling a bearish trend. Trading beneath the 50-SMA (green line), 100-SMA (blue line), and 200-SMA (red line) indicates the presence of downward momentum. Although the RSI is showing a slight upward trend, suggesting a potential reversal, the low volume hints at uncertain market sentiment.
Short-term trading opportunities could surface towards R21.89 if bearish momentum persists, potentially leading to a test of the R18.53 support. Alternatively, a push higher might create opportunities towards R27.11, with subsequent resistance levels at R29.53 and R33.03.
Summary
Pick N Pay Stores Ltd faces significant hurdles following its loss-making half-year results. The current technical stance shows downward momentum, with R21.89 and R27.11 as significant levels for bearish and bullish moves, respectively. If the downtrend continues, a potential downside toward R18.53 might be witnessed. Conversely, a bullish push above R27.11 could open paths towards R29.53 and R33.03.
The company’s attempts to rejuvenate under new leadership indicate a long-term effort towards restoring growth and profitability. Still, the current technicals imply a cautious outlook until more stability is observed in the price action.
Sources: TradingView, Pick N Pay, MoneyWeb, Reuters, MT Newswire, Bloomberg, BusinessLive.
Piece written by Mfanafuthi Mhlongo, Trive Financial Market Analyst
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