Price war looms
Battle of the food retailers — which is a buy, which is a sell?
On the face of it, Pick n Pay’s results were solid — but dig a bit deeper and the rot in the sector becomes evident
A price war appears to be brewing in SA’s food retail sector. It has all the makings of being as bitter as that which has raged in the UK market for the past two years. In an interview with the Financial Mail, Pick n Pay CEO Richard Brasher is reluctant to provide a definitive view on the risks this would create. "I am always nervous to talk about a price war but the reality is that competition is intense," he says. Warren Jervis, an analyst at Old Mutual Investment Group, is far more blunt. "Anyone who thinks the chances of a price war are low is seriously understating the risk," he says.This may be why investors are fleeing. Pick n Pay’s stock is down 11.5% over the past year, Spar is down 11.6% and Woolworths is down 26%. Only Shoprite rose, by 10.4%. Amid all these ominous signs, Pick n Pay is taking a defensive posture. "In our past year we took corrective action to make us more resilient in these highly uncertain economic times," says Brasher. "We did more in our past half-yea...