Pick n Pay’s share price tumbles by almost 19% after announcing unbundling of cash cow Boxer

The group, posting its worst results in October 2023 since listing on the JSE, had no choice but to list Boxer, so it can pay off some debt. The move sent the share price tumbling.

Pick n Pay’s share price tumbles by almost 19% after announcing unbundling of cash cow Boxer

Desperate times call for desperate measures: struggling retailer Pick n Pay has made an all-out effort to get a grip on its debt, by approving a capital raise to stabilise its balance sheet. This means a separate listing of its prized Boxer discount division.

The retailer, which posted its worst results in October 2023 since listing on the JSE, had hoped to “strengthen liquidity, unlock shareholder value and set a platform for long-term sustainable growth”.

But the market wasn’t biting, with PnP’s share price tumbling yesterday by 18.9%. It had strengthened slightly by close to 18.75%. This morning, the share price was still down 16.02%.

It’s the group’s worst performance since October 2004.

Hopefully, the proposed two-step equity capital raise will put it on firmer ground, with Boxer’s shares listed on the JSE towards the end of this year.

PnP plans to hold onto a majority stake in Boxer after the initial public offer, and hopes to raise around R4-billion in the process.

Group statement

In a statement, the group said the terms of the capital raise were still being finalised and subject to final board approval, plus shareholder and regulatory approvals. The Ackerman family, who own majority shares in the group, have backed the process.

PnP said it would give more details about the capital raise after its full-year results (in May).

Pick n Pay CEO Sean Summers warned on his return to the group in October last year that it would be a bumpy ride, after the retailer’s trading profit tanked by 97.5% in just six months.

Summers had indicated that it would take at least 18 months to get Pick n Pay back on track, and it’s going to take a massive effort.

“The truth is, Pick n Pay has fallen out of love with its customers, its people and its suppliers. This is what lies ahead of us. This is why it’s so exciting. Because from here, we go up,” he told investors.

In its statement yesterday, PnP said its supermarkets business’ trade performance was disappointing, with sales down -0.1% for the 47 weeks ended 21 January 2024.

“This, together with increased inventory levels and strategic investment into Boxer, Pick n Pay Clothing and asap!, has led to a marked increase in net debt, from R3.8-billion at the end of H1 FY24 to R7.2-billion at 21 January 2024.

“The group’s net debt position improved in February 2024, largely as a result of the receipt of R0.5-billion of cash proceeds from the sale of property, and good progress was noted in reducing inventory levels over recent weeks, with the cash benefits thereof expected to flow after year-end.”

But the balance sheet needs to be restructured and stabilised, Summers said.

The Boxer listing is part of the group’s new focus, which includes a reorganised leadership team and a strengthened and simplified operational structure, which will allow it to focus on in-store execution and customer service.

Some aces up its sleeve

Yet PnP has a few other aces up its sleeve, besides Boxer, whose sales are up 17.1% for the 47 weeks ended 21 January 2024.

Pick n Pay Clothing stores grew by 17.5% over this period, and Pick n Pay Online grew by 75.8%, with strong performances from both the relaunched asap! delivery platform and the group’s partnership with Mr D. DM