Get Pick n Pay for free

Pick n Pay’s market cap has fallen below the value of its stake in Boxer, which means investors essentially get Pick n Pay Stores for free if it invests in the company.

The big question, however, is whether investing in Pick n Pay or buying Boxer directly through its JSE listing is the best option.

The topic divides analysts and portfolio managers, who have differing views on Pick n Pay CEO Sean Summers and his team’s ability to turn the company around.

To understand the retailer’s current situation, it is essential to turn back the clock to 2023, when Summers took the helm for a second time.

When Summers became CEO in September 2023, the business was in a bad spot. Pick n Pay was overloaded with debt and unprofitable.

Summers implemented a two-step recapitalisation project to clean up the balance sheet and give the business capital for growth.

The first step was a R4 billion rights offer, where Pick n Pay shareholders provided the company with capital to cover the majority of its short-term debt.

The second step was to list Boxer on the JSE, which raised sufficient capital to pay off its remaining short-term debt and cover its long-term interest-bearing debt obligations.

With the Boxer initial public offering (IPO), Pick n Pay disposed of 34.4% of its 100% Boxer shareholding for R8.5 billion, which adequately covered the group’s debt obligations.

When Pick n Pay conducted the IPO for Boxer, the market valued Boxer at R24.7 billion. As soon as Boxer started trading, its price jumped to a market value of R28.8 billion.

This made it possible for investors to see at what price the remaining Pick n Pay business, called Pick n Pay Stores, was valued.

Assuming Boxer was valued at its IPO valuation when Summers became CEO, up to when it was listed, the remaining Pick n Pay business’s implied market value can be analysed.

When Summers took over in 2023, the implied market value of the Pick n Pay Stores business, therefore excluding Boxer, was R1.6 billion.

As Pick n Pay’s performance weakened and its balance sheet reported technical insolvency, its market value deteriorated.

Overburdened by debt, Pick n Pay Stores had an implied negative market value of R12.2 billion by April 2024.

This means that, before the rights offer and Boxer listing, the market discounted Pick n Pay to less than nothing.

As the rights offer capital was injected into the business and the Boxer listing neared, the implied value of Pick n Pay Stores increased gradually.

Right before the Boxer listing, Pick n Pay’s implied value improved to a negative R2.3 billion. This was in anticipation of the JSE listing.

After the very successful Boxer listing, Pick n Pay Stores jumped to a positive implied value of R3.5 billion.

However, since then, Pick n Pay Stores has seen slow progress, only growing their turnover by 2% for the 2025 financial year and still reporting an operating loss of R549 million.

Boxer, in comparison, reported much better performance for the 2025 financial year, with revenue growth of 13.2% to R42.7 billion and an operating profit of R2.3 billion.

Since the listing, the implied value of Pick n Pay steadily declined from R3.5 billion to a negative valuation of R1.5 billion.

The market value of Pick n Pay shows that shareholders have essentially discounted Pick n Pay Stores to nothing.

Analysts who like Pick n Pay

Nomtha Ngumbela, an Assistant Portfolio Manager and Analyst at Umthombo Wealth, is bullish on Pick n Pay’s prospects.

“Since the Boxer IPO, Pick n Pay has cleaned up its balance sheet and has given Sean Summers and his team capital to fix the business,” she said.

Ngumbela believes Summers can turn Pick n Pay Stores around as he is an experienced and capable leader.

“He was at the helm of Pick n Pay for 11 years and has tremendous experience in the retail space. If you bet on a horse, Sean Summers is the right one,” she said.

Nitrogen Fund Managers’ Rowan Williams is also upbeat about Pick n Pay’s prospects and prefers it over Boxer.

He likes the prospect of benefiting from Boxer’s strong performance and the upside offered by a potentially successful Pick n Pay turnaround.

“In terms of the current spread in valuations, if you buy Pick n Pay, then you will get exposure to Boxer and its fundamental performance,” Williams said.

Williams also said Pick n Pay has made strong progress in its turnaround, with its balance sheet looking much healthier after the rights issue and Boxer IPO.

“The progress made to date inside Pick n Pay and its balance sheet concerning its turnaround, you will see the emergence of a very different business,” he said.

“What you are going to see is a smaller, profitable business. The clothing business is already a nice, profitable business, and the supermarket business can still do well. It is still a strong brand with good sites.”

As a result, Williams said, you may be left with a business that has cut its losses and is much smaller and profitable, with a controlling interest in Boxer.

“So, at this point, we would prefer Pick n Pay over Boxer. We like the Boxer story, and that is part of why we like Pick n Pay as well,” he explained.

Analysts who are not upbeat about Pick n Pay’s prospects

Cobus Potgieter, Chief Investment Officer and Portfolio Manager at SouthernCross Capital, said he prefers to invest in Boxer directly.

He warned that the market may consider Pick n Pay Stores to be worthless, given the retailer’s significant challenges.

He shares this view, saying that Pick n Pay is a dying animal which is slowly losing ground against its competitors.

As tough times hit, it will sell a bigger and bigger stake in Boxer to prop up the struggling Pick n Pay Stores business.

“I am usually a guy who loves these opportunities. However, I don’t believe in the team with Sean Summers to turn Pick n Pay around,” he said.

Ricus Reeders from PSG Hole in One Ruimsig shared Potgieter’s views, saying he would leave Pick n Pay for people who like financial engineering.

“If Pick n Pay was a business with potential or on the brink of a turnaround, I would consider starting to look at how the finances are doing,” he said.

“However, to start with the finances and then saying it forecasts a good operational environment is the wrong way around.”