Illustrative Image: Boxer’s simple business model is working beautifully in the retail space, while Country Road is still giving Woolworths a headache. (Photo: Supplied | Sourced / V&A Waterfront website) 
Death, taxes and pain for Woolworths in Australia: these are the three certainties in life. Just when investors thought it was safe to go outside again after the disposal of David Jones, the troubles in Australia have worsened for Woolworths’ Country Road business. It’s become so dreadful that we once again have a situation where the group performance is on a negative trajectory, purely because of the offshore operations, despite signs of improvement here at home.
In stark contrast, Boxer’s simple business model is working beautifully in the retail space. It’s a great example of getting one thing right and then scaling it, much like Capitec managed to do in the banking sector with a similar client base of lower income South Africans. Perhaps being forced to have a compelling offer at the most competitive possible price creates a culture of focus and nailing the basics, leading to a better business overall?
With both retailers having released important updates in the past week, it’s worth digging deeper to understand why investors appreciate business models that have fewer layers of risks. We begin with Boxer as the poster child for what the market loves seeing.
Boxer is the best part of Pick n Pay
Although Boxer is now separately listed, Pick n Pay retains a stake of roughly 65%. This gives it control over an excellent grocery business that is carving quite the growth path in South Africa, while having the flexibility to further reduce its stake if needed to support the Pick n Pay balance sheet. Here’s a fun fact while we are at it: if you work out the value of Boxer that is embedded in the Pick n Pay market cap (by just taking Pick n Pay’s share of Boxer’s market cap), you’ll find that the market is valuing the rest of Pick n Pay at basically nothing. With Pick n Pay only expecting to break even again in 2028, that’s not a surprise.
Read more: Boxer’s JSE debut: a promising start amidst investor optimism and strategic growth plans
As for Boxer itself, the good news is that sales are accelerating rather than slowing down. The company released a trading update for the 17 weeks to 29 June 2025 that reflects sales growth of 12.1% overall and 3.9% on a like-for-like basis. Impressively, this is better than the second half of FY25, in which Boxer grew 9.0% overall and 3.7% on a like-for-like basis.
The gap between those two growth rates is explained by the store rollouts. Boxer is expanding, as its business model is successfully resonating with customers. This means that it has two primary levers of growth, namely the existing stores getting better (that’s what “like-for-like” growth refers to) and the opening of new stores.
The particularly striking thing about these numbers is that Boxer achieved them despite having negative food inflation in its business. This makes it much tougher to grow those like-for-like sales, as the entire increase must come from an uptick in volumes rather than prices. In fact, in a negative food inflation environment, the increase in volumes must be so strong that it offsets the negative price move before contributing to positive growth. With negative food inflation of -0.6%, it’s likely that Boxer grew volumes by more than 4.0% based on where it came out in like-for-like sales.
This isn’t necessarily to say that food inflation was negative for all grocery stores in South Africa, as the mix of products at Boxer is tilted heavily towards basics. It’s also a reflection of Boxer’s own pricing decisions, rather than what the underlying cost of goods necessarily did. By having an efficient business, Boxer is able to keep prices down and attract customers through its doors. That’s why it currently trades on a lofty price/earnings multiple of 23x, with many admirers in the market.
Country Road, Woolworths shoulda stayed home…
The song is probably as popular at the Woolworths offices as the underlying business in Australia. In other words: not very.
In a trading statement for the 52 weeks to 29 June 2025, we find that Woolworths expects adjusted headline earnings per share (HEPS) to drop by between 17% and 22%. This unpleasant situation is despite a much better story in South Africa than we’ve seen in a while, with Country Road raining on the parade with a 6.8% decline in sales on a comparable store basis and suffering a decrease in gross margin. With that combination, net profit could only have gone down.
Read more: Woolworths trims dividend as Australasian operation weighs on results
Now for the good news that has driven a roughly 6% increase in the share price in the past few days: Woolworths Food grew sales by 9.2% for the year and 10.6% in the second half (in both cases excluding Absolute Pets and on a comparable 52-week basis), which means there was positive momentum and a solid growth rate overall. And in the fashion, beauty and home division, which has been the bugbear for investors for some time now, there was growth for the full year of 5.1% in comparable stores. Again, positive momentum is visible with growth of 7.0% in the second half.
In case you somehow needed further evidence that Woolworths and Boxer have completely different business models, price inflation at Woolworths Food was 5.3% for the period and 4.2% in the second half. Although the second half isn’t perfectly comparable to the period in Boxer’s update, it’s close enough. The rate of inflation may have slowed at Woolworths Food, but prices are still on the up.
The midpoint for the guided range of HEPS is around 300 cents. With the share price trading above R51 per share, Woolworths is trading on a price/earnings multiple of around 17x. If it weren’t for the Australian mess, that multiple would almost certainly be well above 20x, where names like Boxer and Shoprite are trading.
Alas, “if” is a big word in corporate strategy. DM