Pick n Pay exposed

Pick n Pay plans to unbundle Boxer from the group and list it on the Johannesburg Stock Exchange (JSE), exposing current shareholders only to Pick n Pay stores.

In its latest trading statement, Pick n Pay announced that the Boxer initial public offering (IPO) is advanced and should occur in late 2024 or early 2025.

Pick n Pay expects to raise close to R8 billion through the Boxer IPO, which will be used to strengthen its balance sheet.

The retailer said the net proceeds will be invested in the turnaround of its Pick n Pay supermarket business and debt repayment.

Unfortunately, Pick n Pay has not provided much information about the Boxer listing or the performance of its separate units.

A prominent question among Pick n Pay shareholders is whether they will receive Boxer shares as part of the IPO.

Daily Investor asked Pick n Pay about this issue, but the company preferred not to comment. In fact, any discussion about the Boxer listing was off-limits.

The lack of information caused widespread confusion in the market, with analysts and fund managers sharing conflicting views on the matter.

Evan Walker of 36ONE said Pick n Pay should give its shareholders Boxer shares. However, it is unlikely to happen.

“I don’t think it will work on that basis. It will likely be a bidding process where they open up the listing where investors get allocated shares based on their price,” he said.

Other analysts, including Andrew Padoa from Sasfin Wealth and Thamsanqa Netha from Shiloh Capital, expect Pick n Pay shareholders to automatically get Boxer shares.

Netha expects Pick n Pay to follow the same route as Naspers with MultiChoice and Transaction Capital with WeBuyCars, where they gave the businesses to shareholders.

“If you are a shareholder in Pick n Pay, hold on. You will get your Boxer shares,” Netha said in a Business Day interview.

The lack of information about the Boxer IPO and Pick n Pay’s refusal to clarify the matter leaves shareholders in the dark about what to expect.

Pick n Pay exposed

Another challenge for Pick n Pay shareholders is that the company does not provide a detailed financial breakdown of its separate business units.

The retailer provided a segmented look at Boxer and Pick n Pay’s turnover, trading profit, and trading margin in its latest financial statements. However, this is where it stopped.

It means that shareholders do not know what they will be left with after Boxer is unbundled from the Pick n Pay group.

Many stakeholders asked about this issue during the company’s results presentation. However, its executives would not provide any details.

Pick n Pay CEO Sean Summers and CFO Lerena Olivier said they could not give any further details on Boxer because of the pending listing on the JSE.

Without official figures from Pick n Pay, Daily Investor delved into numbers to see what Pick n Pay would look like without Boxer.

It is important to start by explaining why the Boxer IPO is needed. Pick n Pay was in a desperate financial position at the end of the 2024 financial year.

The group’s debt increased to an unmanageable R11.4 billion, larger than Pick n Pay’s market cap of R10.7 billion when the data was released.

The interest on its debt reached R2.4 billion, which put incredible pressure on the group and resulted in a loss before tax of R4.1 billion.

Even more concerning was that Pick n Pay was technically insolvent. Simply put, it could not cover its liabilities if it sold all its assets at their audited book values.

Pick n Pay had to act to tackle its debt, so it launched a two-step recapitalisation plan involving a capital raise and listing Boxer.

In August 2024, the retailer raised R3.9 billion from shareholders through a rights issue, lowering its debt to R7.2 billion.

The second step, the Boxer IPO, seeks to raise R6 billion to R8 billion. Pick n Pay is confident it will be on the higher end of the guidance.

However, the group faces a challenge. Boxer is, by far, Pick n Pay’s fastest-growing and most profitable business segment.

It raises the question of what shareholders will be left with after Boxer is unbundled from the Pick n Pay group.

Boxer versus Pick n Pay trading profit

Over the trailing 12-month reporting period, Boxer generated a R39.5 billion turnover and a R2 billion trading profit.

In the last interim period, the Pick n Pay Group reported a trading profit of R82 million. This was far lower than Boxer’s trading profit.

The only reason why the Pick n Pay Group did not report a trading loss was because of Boxer’s strong performance.

Boxer reported a R801 million trading profit, while the Pick n Pay stores reported a R719 million trading loss.

In fact, over the past year and a half, Pick n Pay stores reported consistent trading losses, while Boxer was the only business unit in the group delivering trading profits.

Without Boxer, Pick n Pay will report significantly greater losses than it currently reports as a group.

Pick n Pay and Boxer growth

Pick n Pay stores, which is what shareholders will be left with after the Boxer IPO, have experienced very poor growth over the past 12 months.

For the H2 2024 period, Pick n Pay stores’ turnover decreased by 0.33%. Similarly, its turnover decreased by 0.34% in the latest H1 2025 interim results.

In contrast, Boxer’s turnover grew by 18.6% in H2 2024 and by 12% in the last H1 2025 period. Boxer has generated nearly all of Pick n Pay’s growth in recent years.

Profits and losses

The Boxer IPO will solve Pick n Pay’s debt problems. However, it comes at a cost as the retailer will dispose of its most valuable asset.

This will allow investors to invest in Boxer, a healthy and growing business, instead of Pick n Pay, which is struggling.

Boxer is the only profitable segment in the Pick n Pay group. In comparison, Pick n Pay stores are piling up significant losses.

In the 2024 financial year, Boxer reported a profit before tax of R1.8 billion, while Pick n Pay stores reported a loss before tax of R5.9 billion.

The group’s most recent interim results show that Pick n Pay stores reported a loss before tax of R1.76 billion, while Boxer reported a profit before tax of R679 million.

Pick n Pay’s future

Without Boxer, Pick n Pay will be a very different company. It will generate large losses, unless there is a quick turnaround.

What is more positive is that the company will significantly reduce its debt and remove its high interest expenses.

However, the reduction in interest expenses alone will not be enough to make the Pick n Pay stores business profitable.

Significant cost-cutting and expense management will be required to return Pick n Pay to profitability. Without these measures, Pick n Pay stores risk falling back into debt.

Without Boxer, the Pick n Pay group will also be much smaller, with a third of its operations listed separately.  

Pick n Pay stores’ poor growth and large losses make the company unattractive to investors. However, a successful turnaround is possible.

Most analysts agreed that it comes down to whether investors trust Summers to make Pick n Pay great again.

36ONE’s Evan Walker said it would be challenging for Pick n Pay to attract customers to its stores, considering the tough competition from Woolworths Food and Checkers.

“Checkers is leading edge, and Woolworths Food still has a wow factor because its food is so classy,” Walker said.

“I am struggling to see where Pick n Pay CEO Sean Summers can pitch Pick n Pay and get the wow factor back.”

He added that Summers’ strategy of cutting stores and chasing profitability is the right thing to do. However, it will be challenging to grow.

Andrew Padoa from Sasfin Wealth concurred, saying it will be tough for Pick n Pay to regain market share.

“Wherever I drive around, there are Checkers Sixty60 scooters everywhere. Pick n Pay has lost a lot of market share to its peers, and it will be tough to regain it,” he said.

Thamsanqa Netha from Shiloh Capital said the South African retail market is extremely competitive, which makes it tough for Pick n Pay.

“Woolworths Food has tightened the ship, Checkers has positioned itself as Woollies Light, and Shoprite remains the top bargain store,” he said.

“Pick n Pay will have to find a space for itself somewhere between there. Their struggle is the value proposition they bring to the market,” he said.