Boxer blows the JSE horn

Discount retailer Boxer was listed on the Johannesburg Stock Exchange (JSE) on Thursday morning under the ticker “BOX”.

The retailer’s initial public offering (IPO) concluded on 22 November, with 157.4 million shares being allocated to qualifying investors at a share price of R54. This raised R8.5 billion for its parent company, Pick n Pay.

Boxer Superstores is a leading discount grocery retailer in South Africa with an annual turnover of R37.4 billion, a trading profit of R2.1 billion, and 489 stores.

The retailer is one of Pick n Pay’s most profitable and fastest-growing segments, and therefore, there is great excitement surrounding its listing.

With Boxer’s total issued shares being 457,407,408, its IPO concluded with a market cap of R24.7 billion. This represents a market cap that is greater than the market cap of the Pick n Pay group, which stands at R22 billion.

Originally launched under the name KwaZulu Cash & Carry in 1977, the first store just wholesaled essential goods in the surrounding area.

Its rapid growth soon meant it had to reposition its brand as a discount food retailer in the lower-income market and changed its name to Boxer Cash & Carry. The Cash & Carry disappeared, and the company became known as Boxer.

Pick n Pay snapped up Boxer in 2002 for R185 million to expand its reach into rural and peri-urban areas, specifically in KwaZulu-Natal and the Eastern Cape, where Pick n Pay was underrepresented.

The resources made available by Pick n Pay to Boxer enabled it to grow its footprint rapidly, launching Boxer Build in 2004 and Boxer Liquors in 2009. 

Currently, there are 281 Boxer Superstores, 150 Boxer Liquors, 31 Boxer Build stores and 15 Boxer Punch stores.

In a highly competitive market where a few retailers dominate, particularly in the discount supermarket segment, Boxer is putting up a formidable fight, having added an average of one new store weekly for the last three financial years. 

It expects to add 65 new stores by the end of this financial year.

In the medium to long term, Boxer aims to double its store footprint by opening 60 to 70 stores yearly for the next six to seven years.

The company has a market share of 68% of the discount grocery retail market and an estimated market share of 4.2% of the formal grocery market.

Boxer’s turnover grew at a CAGR of 18.6% between FY2022 and FY2024, with like-for-like growth of 7.7%.

Boxer has a 47-year history and track record of consistent growth since Pick n Pay acquired the business in 2002 under the leadership of then-CEO Sean Summers.

It will be interesting to see how Boxer competes as a standalone company, although it should be noted that Pick n Pay retains a significant shareholding in the retailer.

Boxer’s listing is especially exciting since it is a growing company, and new listings on the JSE are few and far between.

The excitement for this listing was already seen during Boxer’s IPO. 

Boxer offered up to 202.4 million shares, around 40% of its total issued share capital, at a share price of between R42 and R54 per share

However, around a week before the listing, Pick n Pay informed qualifying investors that orders submitted below R54.00 per share risked receiving no allocation.

“The order book is multiple times covered at the top end of the offer price range,” Pick n Pay said in a SENS announcement.

It said an offer price at the top end would result in the issue of up to 157,407,408 shares, representing up to 34.4% of Boxer’s issued share capital. Pick n Pay will hold the remaining 65.6%.

M&G Investments equity analyst Damon Buss said that Boxer’s listing will benefit the company in the long run and enable it to compete against its larger peers.

However, Buss questioned whether the R10 billion and R12 billion raised by issuing new shares and listing Boxer would be enough to fix Pick n Pay’s problems.

This may result in it using its controlling stake in Boxer to implement a generous dividend policy to send cash back to Pick n Pay to invest in its own business.

This would either restrict Boxer’s ability to roll out more stores or force them to take on debt. Neither is as beneficial as allowing Boxer to use its cash to fund its own growth.