RETAIL SHIFT
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.
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.
Read more in Daily Maverick: Above-inflation hike in ‘sin tax’ is a blow for the wine industry
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
Become an Insider
PnP will go nowhere if they continue to play loud “music” and blast adverts at their customers. They have lost the plot about creating a pleasant shopping environment.
He will be hailed as a genius next year when any numbers better than this low base seem amazing ??
IF the truth be known the late Raymond Ackerman’s children have and continue to add no value to the business. They must take responsibility for sorry state of affairs at PnP. The swifter they detach themselves from the business and get proper day jobs the better.
As for Sean Summers minority shareholders like us have every faith in his ability to not only in placing the iconic SA business back on a growth trajectory, but to craft and implement a solid succession plan.
We stopped shopping at Pick n Pay more than 3 years ago, primarily because of the attitude of their staff at the cash tills. This varied from unfriendly to hostile. Checkers staff is open and friendly and Woolworths are a model PR organisation in every respect. An occasional visit to Pick n Pay in the last 3 years has revealed an even greater anti-customer vibe and the company is going to need some serious introspection when it comes to staff placement.
I agree with the unfriendly and even hostile at times till staff. There are always exceptions and it depends very much on the day! Some don’t even smile or look up when one starts to unpack your trolley! Shoprite is another one to be careful in this regard.