Beleaguered supermarket giant Pick n Pay will report its final results next week, and the numbers will probably make for scary reading.
This week Pick n Pay, somewhat unexpectedly, sold down its holding in separately listed subsidiary retail business Boxer, raising a chunky R4.7bn in fresh capital. While Pick n Pay easily placed the buoyant Boxer shares at a slight premium, the move was seen as desperate, and rightly rattled the market.
At Tuesday’s close, Pick n Pay shares had shed 3% in value — a reverse of the upward trajectory since the beginning of the month. The worry, of course, is the cash burn as the group’s main supermarket core trundles along in the red.
Will this be the last chunk of cash that needs to be pitched at the turnaround? Retailers like Pick n Pay operate on a sliver of a margin, and it is incredibly difficult to rebuild the margin — without radical restructuring — when your main competitor, in the form of Shoprite, is chewing up market share.
If more cash is needed, Boxer will most likely be tapped again. Pick n Pay reiterated its commitment to retaining a controlling stake in Boxer, which leaves little room to manoeuvre. Another rights issue seems out of the question after the group raised R4bn in August 2024, when investors were probably a tad more optimistic about its turnaround strategy. With the market attaching a negative value to the share, issuing new shares for cash would not be at all prudent.
Let’s hope there is evidence of a clear pathway to returning the core Pick n Pay stores segment to cash flow breakeven in the upcoming results.
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