Pick n Pay, a major South African grocery retailer, is aiming to raise up to 8 billion rand ($453 million) in Boxer IPO, its discount chain, Boxer.
The plan, revealed Thursday, is part of a broader effort to stabilize the company’s finances after years of financial turmoil.
Pick n Pay’s troubles
Pick n Pay has faced severe financial challenges, culminating in technical insolvency. This basically means that the company’s liabilities far exceed its assets. Put simply, if Pick n Pay were a person their net worth would be negative.
In the most recent financial year, the core supermarket division reported a 1.5 billion rand ($85 million) loss, contributing to an overall group loss of 3.2 billion rand ($181.4 million). Compounding the problem Pick n Pay breached the conditions of its loans, which increased from 3.7 billion rand ($209.7 million) in 2023 to 6.1 billion rand ($345.8 million) in 2024.
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Pick n Pay’s struggles have been exacerbated by external factors, including South Africa’s sluggish economic growth and ongoing load shedding, which have strained profitability. The rising costs of maintaining backup power, coupled with increased competition and reduced consumer spending, have pushed the retailer to the brink.
Turnaround strategies
In an effort to reverse its fortunes, Pick n Pay replaced CEO Richard Brasher with Pieter Boone in 2021, hoping his experience would steer the company back on track. However, the situation worsened, leading to the rollback of many of Boone’s strategies.
In May 2024, Sean Summers, who served as CEO from 1999 to 2006, was brought back to lead the turnaround.
Summers is now focused on reversing years of declining market share to rivals like Shoprite. As part of these efforts, Pick n Pay recently raised 4 billion rand ($226.7 million) through a rights issue, aimed at reducing debt and improving the performance of its supermarket division.
The next phase involves the planned listing of Boxer, the only part of the business doing relatively well, towards the end of 2024, pending shareholder and board approval.
While specifics about the IPO, including share pricing and target amounts, will be provided later, the company anticipates raising 8 billion rand ($453 million) from the listing.
According to Pick n Pay, “The Boxer IPO will ensure that Boxer is accorded a market value that appropriately reflects its growth trajectory and return on invested capital, thereby unlocking shareholder value embedded in the Group.”
Rebranding
Additionally, to streamline operations and boost profitability, Pick n Pay is closing and rebranding around 100 underperforming stores.
This initiative includes shutting down 16 supermarkets in the first 21 weeks of the current financial year, affecting both corporate-owned and franchise outlets.
Summers has outlined plans to close 35 underperforming stores and convert 70 outlets to the Boxer brand marking a departure from former CEO Boone’s previous strategy which divided the Pick n Pay brand into segments targeting different market demographics.
With a stronger balance sheet and a renewed focus on operational efficiency, the retailer is working to regain its footing in a highly competitive market.
The Boxer IPO and ongoing turnaround efforts may just be what Pick n Pay needs to restore its position as a leading player in South Africa’s retail landscape.
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