Boxer, which is set to be independently listed on the JSE, is embarking on an ambitious expansion plan that includes the opening of more than 500 new stores over the next seven years, strategically designed to increase its market share.
The Pick n Pay discount chain, which operates 500 stores nationwide comprising 308 Superstores, 162 Liquor Stores and 30 Build Stores, said it plans to double its presence in the rapidly expanding discount market, a strategy that is expected to create a substantial number of jobs.
The group said it is targeting a R105bn “whitespace opportunity” in the local grocery market as it rallies to lead the discount segment and expand its footprint. This potential market includes areas where Boxer has yet to establish a presence but sees high demand for its discount-driven offerings.
Boxer’s strategy also involves capturing a portion of SA’s informal grocery sector, which represents 34% of the market. It plans to roll out more stores in underserved regions with the intention of formalising grocery shopping in these areas by offering a structured, competitively priced alternative to informal vendors.
Boxer faces fierce competition from Shoprite’s discounter subsidiary, Usave, which recently grew its own store count to 463, including 44 “Usave eKasi box” stores in SA townships.
Pick n Pay’s own discount brand, Qualisave, was recently restructured after CEO Sean Summer’s return, with its underperforming stores being converted back into Pick n Pay outlets as part of the company’s turnaround strategy.
Investment manager and analyst Muneer Ahmed said there was enough market space for all the retailers to exist in the short to medium term.
“Shoprite remains a very strong competitor. In the short to medium term there is enough space in the market for both to grow at the expense of independent retailers. Longer term the battle for space will be challenging,” he said.
Boxer’s independent listing is part of a two-step recapitalisation plan by Pick n Pay to reduce its debt and reinvest in its primary supermarket business. Through the Boxer initial public offering (IPO), Pick n Pay is offering up to 40% of Boxer’s issued share capital, equivalent to 202,380,953 shares, at R42-R54 per share.
After listing, Boxer would be worth R21bn-R24bn, placing its market capitalisation above Pick n Pay’s valuation of R19bn, the group said.
Despite selling a share of Boxer, Pick n Pay will retain majority ownership with a 60%-65% stake post-IPO. This will allow the retailer to maintain control of Boxer while benefiting from its growth. The IPO is expected to raise R8bn-R8.5bn.
Boxer’s board, which notably excludes any members of the Ackerman family (Pick n Pay’s founders), will include former Pepkor CEO Leon Marius Lourens, Charlotte Maponya, daughter of the late business icon Richard Maponya, and MTN CFO Dineo Molefe.
Boxer is expected to list on the JSE on November 28.
“Boxer is a fast-growing retailer which has performed phenomenally well for Pick n Pay over the past few years. It should command a strong valuation as a stand-alone business. We think there will be strong demand for Boxer shares from institutional investors,” Ahmed said.
“Having been there when we bought Boxer, it is very exciting to see the business come full circle. The Boxer IPO will increase their profile and visibility, providing Boxer with access to a large pool of capital for growth,” Summers said.
“The initial capital raised from the listing will mean Pick n Pay will be debt-free, with a strong balance sheet and a significantly reduced interest bill, and in a position to accelerate its turnaround, driving long-term sustainable growth for all our shareholders.”
According to Chris Logan, investment analyst and owner of Opportune Investments, one might expect rivals to zero in on Boxer’s substantial 68% market share within the discount market, particularly now that this listing is drawing attention. Nevertheless, Boxer seems to have discovered an advantageous niche with its “soft discounter” range, boasting 3,000 stock-keeping units (SKUs) in contrast to Shoprite’s Usave, which offers only 1,900 SKUs.
He pointed out that Boxer had a rich history, starting in 1977, which contributed to refining its formulas. As a stand-alone listed company, it could experience enhanced flexibility and faster execution. In any case, it was comforting to note that the discount retail sector’s penetration in SA was considerably lower than that of comparable emerging and developed markets.
“Discount sector performance in SA should be very good given its very low current penetration and the ongoing pressure that the average SA consumer is under. These are strong tailwinds for Boxer’s growth and profitability,” Logan said.
Update: November 11 2024
This story has been updated with new information.
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