Pick N Pay downtrend about to continue to R23.20 - Fundamentals

Downtrend has been forming on Pick n Pay since 8 Dec 2022.

It's been a difficult period for retailer and looks like there is more downside to come.

200>21>7 - Bearish
RSI<50 - Lower highs

Target R23.20

Apart from its distribution channel issues, I think the weakening rand is the main culprit for retailers downside.

There are a few fundamental reasons such as:

Import Costs:
Pick n Pay, like many other retailers, imports a significant portion of its products.

When the rand weakens, the cost of importing goods becomes relatively cheaper.

This may lead to lower procurement costs for Pick n Pay, allowing them to reduce prices and remain competitive.

Reduced Demand:

A weakening rand can indicate economic instability or uncertainty, consumers may feel worried about their finances and may become more price-sensitive and demand lower-priced goods.

This gives Pick n Pay the undesirable incentive to respond by reducing prices. (Not that we've seen this!)

Supplier Negotiations:
When the rand weakens, suppliers may face higher costs for raw materials or imported goods.

In order to maintain their business relationships and secure supply, suppliers might negotiate lower prices with retailers like Pick n Pay.

These cost reductions can be passed on to consumers through lower prices.

Inflation Pressure:

A weaker rand can lead to higher inflation. Imported goods become more expensive, which can lead to higher overall prices for consumers. If inflation rises faster than wages, consumers may cut back on spending.