Pick n Pay Shares Drop as Earnings Rise Less Than Expected

  • Stock falls most in almost 14 years even as earnings gain
  • South African retailer sees diffucult business conditions

Pick n Pay Stores Ltd., a South African supermarket chain, fell the most in almost 14 years after warning that business conditions remain difficult and reporting first-half earnings that missed estimates.

The shares declined 8.2 percent, the most since December 2001, to 61.49 rand at the close in Johannesburg, a five-week low.

Diluted earnings per share excluding one-time items were between 61.09 cents and 66.40 cents a share in the six months through August, Cape Town-based Pick n Pay said in a statement on Friday. That compared with the 69 cents per share estimate of Alec Abraham, an equities analyst at Sasfin Securities in Johannesburg.

The earnings “are below my expectations and shows the company has done nothing to significantly cut costs or improve margins,” Abraham said by phone. Earnings per share excluding one-time items were “lower than I expected,” added Kyle Rollinson, an analyst at Avior Capital Markets.

Consumer Confidence

South African retailers are battling with consumer confidence that remains depressed as shoppers hold back on spending even as fuel prices fall, First National Bank said on Thursday. Unemployment of 25 percent and almost daily power cuts earlier this year also weighed on households.

First-half earnings per share increased by between 15 percent and 25 percent, Pick n Pay said. Revenue growth was 8.5 percent in the period, compared with 6.1 percent a year earlier.

The stock has gained 17 percent this year, valuing the company at 30 billion rand ($2.2 billion). Larger competitor Shoprite Holdings Ltd. shares are down 8.4 percent this year.

“Retail investors have over the past month pushed up the share and this has been overdone,” Abraham said.

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