PIK issued a circular relating to its recapitalisation plan, including detailed financial information on Boxer, which will be separately listed later this year. We use this first-time disclosure of Boxer’s financials to disaggregate the financials of the Pick n Pay (PnP) division and compare the divisions’ performance over the past three years.
Boxer showed good margin improvement over the past two years, but it is not clear if this is a reversion to pre-Covid margins. It has a very low cost base, with an average staff cost less than half that of PnP. We believe PnP’s legacy of generous staff benefits discourages churn in lower-level staff, resulting in inflation creep in average staff costs over the long term. PnP’s merchandise and admin costs seem bloated, and while Boxer’s costs in this department are much lower, we think it could reset higher when it lists separately.
The capex intensity of Boxer and PnP is surprisingly similar. Boxer stores are more basic, with less refrigeration and cold chain, while some parts of the store have stock placed on pallets on the floor. We expected the average store capex to be substantially lower than PnP stores.