Can Pick n Pay reach its break-even target of FY29?

Based on the closing price on 29 October, Pick n Pay’s share price is down 2.2% year-to-date(1). Goodness knows it’s been a lot worse this year, with that closing price (R24.05) being well above the 52-week low of R17.55.

There’s been a strong rally in response to the release of earnings for the 26 weeks to 30 August 2026. After closing at R21.33 on 23 October, the share price was up to R24.18 by close of play on 27 October. That’s an increase of 13% in just a few days around the time of the release of results on 26 October.

This isn’t an indication of how the stock might perform in future periods, but it does suggest that the market took a positive view on the latest earnings release.

Is this because Pick n Pay is suddenly profitable? No. The Pick n Pay segment is still deeply loss-making, with a trading loss (net of leases) of nearly R1.1 billion for the period. (2)

Keep in mind that this is the loss for an interim period, not even a full year!

Pick n Pay still has a mountain to climb before potentially reaching the target of achieving break-even for the Pick n Pay segment by FY29.

What could a deeper look at the numbers reveal about the turnaround?

Starting at the top: the turnover story

Turnover is the lifeblood of any retailer. If there are no sales, there are no profits. If sales come under enough pressure, it barely matters what happens at operating cost level.

This means that protecting the top of the income statement is paramount.

This is a good time to remind you that Pick n Pay has a controlling stake in Boxer, so the group financial statements reflect both Pick n Pay and Boxer on a consolidated basis. But we know from previous reporting that Boxer has been performing well (e.g. turnover growth of 6.3% in this period), so the focus here will be on Pick n Pay.

The Pick n Pay segment experienced a 0.1% decline in turnover. This number needs more context though, as the group has been reducing the number of stores as they’ve looked to rationalise the footprint and focus on stores that have a better chance of being profitable.

This is a mature but painful approach, with a reduction of 19 stores over the past 12 months to 520 total stores. When the footprint is shrinking, it creates a headwind for total turnover growth as there are simply fewer stores actively trading.

At least the online business grew turnover by 35.4%, benefitting from two major initiatives during the period: the launch of Pick n Pay Clothing in the asap! app, and the introduction of Penny (an AI-powered grocery shopping assistant).

A change in store mix

Within that store footprint, there’s been a shift in mix from franchise to company-owned supermarkets, with 14 conversions during the past 12 months. This will be important to remember when we get to the profitability metrics.

Franchise-owned supermarkets have been struggling in an omnichannel-focused environment. This is just one of the factors driving this conversion trend.

Focusing on like-for-like sales

The concept of like-for-like sales is always relevant for retailers.

This is where Pick n Pay can tell a more positive story, as like-for-like growth in Pick n Pay company-owned supermarkets was 2.4%. That’s a credible outcome in a tough consumer environment with low food inflation.

The franchise supermarkets could only manage like-for-like growth of 1.0%. This gives us a better understanding of why the store conversions are taking place.

Speaking of Pick n Pay Clothing, the like-for-like performance in standalone stores has put a stain on the numbers. A decline in this metric of 0.7% isn’t what anyone wants to see - except perhaps for Pick n Pay’s competitors!

Profit at the tills: focusing on gross margin

Turnover is just one part of the equation at the top of the income statement. Gross profit margin is of critical importance, particularly as Pick n Pay is lagging its major rivals in this regard.

The Pick n Pay segment’s gross profit margin was 17.5% in this period, several hundred basis points behind the likes of Shoprite and Woolworths.

It’s not appropriate to treat this as a perfect comparison, as Pick n Pay’s margin is a hybrid of corporate-owned and franchise stores, whereas Woolworths and Shoprite follow corporate-owned models (with only limited exceptions). SPAR isn’t suitable for comparison at all, as it follows a wholesale model with a structurally much lower gross margin.

The trend at Pick n Pay delivers some good news though, with Pick n Pay’s gross profit margin increasing by 70 basis points over the past year.

The company refers to “better category and margin management” as the driver of this performance. That’s a deliberately broad narrative, but it serves as a good reminder that retail is ultimately a game of inches. A retailer needs to get a lot of small things right before it adds up to a positive overall outcome.

The factors underpinning the gross profit margin move would range from mix effects (different product categories carry different margins) to more successful supplier negotiations based on improved volumes.

The company also notes the corporatisation of the Botswana stores as a contributing factor here. If the shift from franchise to corporate stores continues, this would theoretically support a higher gross margin over time (all else held equal).

Profit in the stores: the tough stuff

Corporatising the store footprint might be accretive for gross margin, but it leaves Pick n Pay exposed to the profitability at store level - and this remains a material challenge.

The overall store footprint is currently generating substantial trading losses, with the Pick n Pay segment reflecting a pre-lease trading loss of R516 million for the period under review. It gets worse once you deduct lease costs, with the trading loss ballooning to roughly R1.1 billion!

That’s a deep, dark hole for the income statement to try and claw its way out of.

Management has stated a target of reaching break-even in the Pick n Pay segment by FY29. Achieving this target remains uncertain and depends on the company’s ability to improve its operating performance.

What might one of the sources of improvement be?

Focusing on store labour costs

One of the most important turnaround strategies at Pick n Pay is to bring employee costs in line with competitors. Pick n Pay has historically had a reputation in the sector for providing greater benefits to staff than some of its peers. The problem is that those benefits have become unaffordable as the business has swung into losses.

In what was surely a difficult negotiation with SACCAWU, Pick n Pay appears to have secured meaningful concessions from the union. The workers might not be losing their jobs, but they also won’t be enjoying quite the same benefits as before. The hope is that this preserves the jobs over the long term while Pick n Pay fights for profitability.

Writing for the Financial Mail on 28 October 2026, Ann Crotty reported as follows: “Effective 1 November, Pick n Pay employees will experience employment benefits pretty much in line with those of the absolutely no-frills Shoprite.”(3)

The official earnings release wasn’t this detailed, so this statement should be seen as the result of a journalistic enquiry rather than the official company line.

But if the Financial Mail’s characterisation of the agreement is broadly representative of the final outcome, it creates an interesting new lens through which to view the trading losses. This is because employee costs represented roughly 42% of Pick n Pay’s trading expenses in the latest period, making this a highly relevant cost line.

It’s not clear yet how significant the impact of the labour agreement will be, so all eyes will be on the employee costs in the next financial reporting period.

The Boxer anchor

Any discussion on Pick n Pay must include reference to the stake in Boxer.

Pick n Pay holds a majority stake of roughly 53% in the discount retailer. The company hasn’t been shy to reduce this stake to raise proceeds for the Pick n Pay turnaround. This is why one of the many debates in the market is around whether Pick n Pay can steady the ship without losing an outright controlling stake in Boxer as a result of more disposals.

Using the market capitalisation figures cited here, Pick n Pay’s approximately 53% holding in Boxer equates to a gross look-through value of about R21.2 billion. This is a simplified calculation, not a valuation of Pick n Pay shares or a price target. It does not account for factors such as debt, tax, lease liabilities, control or marketability discounts.

Based on the closing price on 29 October 2026, Pick n Pay’s market cap is around R17.8 billion, a few billion rand lower than the look-through value noted above.

This comparison alone does not establish that Pick n Pay shares are undervalued. It compares market capitalisation figures without making the adjustments required for a full valuation. There are numerous additional factors that would need to be taken into account, with different assumptions and valuation methods possibly producing different results.

This should therefore be treading as an indicative calculation, rather than evidence that the shares are undervalued.

Among other factors, the market is weighing up this discount against the trading losses at Pick n Pay, the route to break-even and the risk of further cash burn along the way. This is why the progress made in the turnaround (or lack thereof) tends to receive a lot of attention.

Disclosure: The Finance Ghost does not hold a position in Pick n Pay at the time of writing. BROKSTOCK, its employees, representatives or related parties may hold positions in the financial instruments discussed.  

(1)    Google Finance data

(2)    Financial metrics sourced from Pick n Pay results for the 26 weeks to 30 August 2026

(3)    Ann Crotty, Inside Pick n Pay’s desperate labour deal, Financial Mail 28 October 2026

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