Pick n Pay biting the bullet

Pick n Pay’s ongoing turnaround has led the retailer to sell part of its Boxer stake, which will reduce group earnings in future results.

The retailer is therefore set for some short-term pain, with the hope that it translates into long-term gain, as Pick n Pay remains committed to restoring its former glory and competing against the current market leader, Shoprite.

According to one analyst, this turnaround is seemingly proving more difficult than Pick n Pay CEO Sean Summers initially anticipated.

On Monday, 18 May, Pick n Pay announced plans to raise R4.7 billion by selling an 11.5% stake in Boxer through an accelerated bookbuild.

Boxer is a subsidiary of Pick n Pay, but was spun off and listed separately on the JSE in October 2024. After the listing, Pick n Pay retained a 65.5% stake in the discount retailer.

Boxer’s spin-off formed part of Pick n Pay’s two-step recapitalisation strategy, with the retailer raising R8.5 billion from the listing and another R4 billion from a separate Rights Offer.

The R12.5 billion raised through this strategy was enough to adequately address Pick n Pay’s mounting debt and restore the retailer to a net cash position.

This put Pick n Pay in a far better position than it was before Summers returned to the helm in October 2023.

However, many issues still remain, and Pick n Pay’s turnaround is ongoing, with the R4.7 billion it plans to raise by selling more Boxer shares set to aid its efforts.

Pick n Pay said this sale, which will reduce its Boxer holding to 53.1%, will help the retailer fund its turnaround plan and return the core supermarket segment to profitability and cash flow break-even.

Currently, Boxer is a standout performer in Pick n Pay’s results, with the discount retailer continuing to go from strength to strength.

In contrast, Pick n Pay’s core segment continues to struggle, reporting successive losses.

The disparity between Boxer and Pick n Pay’s performance even led some analysts to point out that investors could essentially buy Pick n Pay for “free”, as its market cap was significantly below the value of its 65.5% stake in Boxer.

Pick n Pay set to feel the pain

Otto1890 senior equity analyst Alec Abraham told Daily Investor that Boxer’s positive profit contribution to the Pick n Pay Group’s results is important and flatters the group’s numbers. 

This flattering effect could be seen in Pick n Pay’s latest annual results, which showed a trading profit of R1.76 billion for the 52 weeks ended 2 March 2025.

This total R1.76 billion figure consisted of a R2.31 billion trading profit from Boxer, offset by a R549 million trading loss from Pick n Pay.

“Any reduction in Pick n Pay’s shareholding in Boxer will have the effect of reducing the Pick n Pay Group’s earnings,” Abraham explained. 

This is why Abraham believes Pick n Pay will not sell down its stake in Boxer below 50%, as this would mean it would no longer be able to consolidate the accounts, “and the stand-alone Pick n Pay accounts will look just awful”.

He said Pick n Pay’s decision to sell part of its stake in Boxer is presumably because the retailer’s turnaround is proving more difficult than Summers anticipated.

Abraham said the company may be struggling with deeper-seated issues than initially expected.

This, he said, can be seen in the fact that Pick n Pay’s management has already pushed out guidance on the break-even date.

In its 2025 results, Pick n Pay said the path back to break-even, profitability, and ultimately long-term sustainable success is clear and will be “executed in a considered and methodical manner”. 

“However, it will take longer than initially envisaged, as the chosen strategy is to build retail muscle memory for long-term success,” the retailer said. 

“As a consequence, where the group previously guided that it anticipated the Pick n Pay segment to break even on a trading profit-after-lease-interest basis in FY27, the group now expects a FY28 break-even.”

Signs of struggle

Abraham also pointed to Pick n Pay’s recent announcement that it expects a greater loss in the 2026 financial year than in 2025 as a sign of more deeply-seated issues within the business.

In a trading update released at the start of February 2026, Pick n Pay informed shareholders that it expects its headline loss for FY26 to increase by more than 20% compared to FY25. 

Another sign that Pick n Pay’s turnaround may be more complex than originally thought is that the group’s initial positive comparable sales growth has been losing momentum of late.

In the same trading statement, Pick n Pay attributed the bigger loss to below-expectation turnover. 

Pick n Pay’s core segment saw like-for-like turnover growth of 2.9% for the 48 weeks ended 1 February 2026.

Lastly, Abraham pointed to Pick n Pay’s “seemingly desperate ‘bonus’ offers” on certain products as being indicative of deeper struggles in the business.

He said some of these bonus offers can go as high as 15 times points on certain products in certain stores, with the aim of stemming market-share losses and attracting customers into stores. 

“I don’t believe such bonus offers are sustainable, and even if partially funded by suppliers, will come at a cost and have the effect of potentially pushing out the break-even date further,” he said.

Daily Investor reached out to Pick n Pay for comment. However, since the group is in a closed period ahead of the release of its 2026 financial year results on Monday, 25 May, it could not comment.