Finance Ghost: Boxer’s higher Price/Earnings multiple than Shoprite

It’s been a hostile environment for local retailers, yet Boxer opened 24 stores in the latest period and reached the 600-store milestone(1). That’s just as well, as the store expansion has been an even more important source of growth than usual, with food deflation creating a drag on like-for-like growth.

The results for the 26 weeks ended 30 August 2026 cover a period characterised by diesel costs and other inflationary pressures putting the squeeze on profit margins.

Such difficult operational conditions tend to widen the gap between strong and weak competitors. Sure enough, the deviation in share price returns in this sector has been breathtaking over the past year. Only Shoprite and Boxer are in the green, up 13.4% and 9.7% over 12 months respectively. Woolworths, Pick n Pay and SPAR are all in the red over that period, with SPAR having shed more than half of its value!(2)

How has Boxer managed to stay on the right side of that equation?

The power of focus during difficult times

Boxer has the most concentrated business model of all the aforementioned retailers in terms of target customer demographic.

This is a discounter model that uses strategies like reduced store assortment and higher private label penetration to deliver the lowest possible prices to customers who are particularly price sensitive.

Boxer is exposed to what is currently a tailwind in this sector: the shift from informal to formal retail. And if you compare the size of Boxer’s turnover to that of Shoprite, there’s scope for further expansion and potential growth here.

The footprint is designed around customers who need to avoid unnecessary transport costs, so Boxer stores tend to be on busy commuter routes that shoppers need to be on anyway to get to work and back.

This strategy means that Boxer has avoided the competitive forces in upper-LSM retail, like the adoption of on-demand retail and the constant need to innovate in the retail assortment.

In practice, this means that instead of being disrupted by Checkers Sixty60, Boxer primarily competes with the Shoprite and Usave banners within Shoprite Holdings. Boxer has practically no overlap with the strategic focus at Woolworths Food, while SPAR and Pick n Pay give more energy to mid- and upper-LSM groups than the lower-LSM shoppers that are Boxer’s territory.

In fact, the attempted turnaround of the Pick n Pay group has included converting a number of stores to Boxers! That’s a strong signal around which model is more effective in addressing lower-LSM shoppers.

Boxer’s premium valuation (more on that later) can be at least partially attributed to the focused strategy in a large and growing market.

Reading the fine print: the deflation hurdle

Boxer’s turnover growth of 6.3% in the latest interim period looks reasonable, but digging into the components of that growth reveals an interesting dynamic between like-for-like sales and the contribution of a growing footprint.

Like-for-like sales growth was just 1.4%, with sales deflation creating a difficult hurdle for Boxer to overcome. To achieve positive like-for-like sales growth, Boxer had to grow volumes by 3.8% — something that isn’t easy to do when consumers are under so much pressure from transport costs.

The rest of the growth was mainly driven by the opening of new stores.

Targeted store rollout strategy

Boxer only pays roughly 40% of its headline earnings to shareholders as a dividend. This means more than half of profits are retained for growth purposes, with store rollouts as the obvious long-term investment focus.

Of the 24 new stores opened during the period, 9 were Boxer Superstores and 15 were Boxer Liquor stores. This strategy is at odds with the prevailing bearishness among investors around alcohol demand trends.

We see a similar trend over the past 12 months, with 32 new Liquor stores vs 20 new Superstores.

Notably, just 1 Build it store was opened in the past 12 months. This is a signal that Boxer is avoiding retail categories that are reliant on consumers having more disposable income. Instead, Boxer is prioritising categories that are typically seen as defensive.

Margins: hard to maintain in this environment

Sales growth is only one part of the story. Many local retailers have recently come unstuck when it comes to margins, leading to nasty outcomes for profitability.

But Boxer has achieved a 50 basis point increase in gross margin, which the business’ leaders attributed to margin mix management and economies of scale. These factors more than offset the pressure from price investment (i.e. being more promotional to attract consumers) and increased transport costs recognised as part of cost of sales.

This demonstrates why we’ve seen such a gap open up between the weaker and stronger players in the sector. Protecting gross margin requires economies of scale, which means growing volumes. Where retailers are unable to grow their volumes, gross margin comes under pressure and the economics can deteriorate quickly.

And even with this performance in gross margin, Boxer’s trading profit margin only improved by 10 basis points to 4.2%.

Expense pressures like wages, security and energy offset most of the uptick further up the income statement in gross margin. Diesel is a particular worry at the moment.

Understanding the debt costs — or lack thereof

Net finance costs increased by 0.4% for the period, suggesting at first blush that Boxer’s debt balance increased. But Boxer actually settled its long-term debt in this period and is in a net cash position, earning net funding interest for the period.

Instead of being related to traditional debt, the increase in net finance costs was due to a 14.4% jump in lease liability interest.

This is because of the way accounting rules require Boxer to recognise the cost of leases that would intuitively be recognised as an operating expense, rather than a finance cost. The effect is amplified during periods of store expansion, as newly signed leases attract higher accounting interest charges in their early years.

Other balance sheet nuances

Working capital comes with its own complexities as well.

Boxer released approximately R1.3 billion of liquidity in this period, but timing differences and seasonality played a role here. This retailer typically releases cash in the interim period and absorbs it in the second half, making it difficult to draw meaningful conclusions about cash generation when looking only at interim results.

Capital expenditure also needs a footnote. There was a 40.6% year-on-year decline in capex, but this was largely due to a non-recurring investment in the prior period in the Tongaat distribution centre. Having built significant supply chain capacity, Boxer was able to focus its capex on store rollouts in this period.

Look out for an acceleration in second-half capex. Full year capex guidance has been maintained at R1.1 billion despite only R320 million being spent in the first half.

A premium valuation vs Shoprite — but will it stick?

Boxer has continued to scale in the market, with healthy volumes more than offsetting food deflation. Management clearly still sees ample opportunity for store expansion.

The market appears to have recognised those strengths. Boxer currently trades on a higher trailing earnings multiple than Shoprite (23x vs 21x). Due to the higher multiple and lower payout ratio, Boxer is also on a lower dividend yield (1.75% vs 2.7%).

Investors are effectively paying for pure exposure to the lower-LSM consumer and the shift from informal to formal retail. Where Shoprite offers broader diversification, higher cash returns and greater scale, Boxer offers greater exposure to the lower-LSM category, with the associated concentration risks.

Looking ahead for the rest of the financial year, fuel prices continue to dominate the narrative in South Africa. Boxer has referred to “low trading visibility” and an “uncertain short-term outlook for food inflation.” This is very important, as it makes it difficult for the group to accurately forecast like-for-like growth. Overall, Boxer expects an improved turnover performance in the second half, aided by the expected reduction in food deflation.

But with Boxer’s IPO now in the rear-view mirror, the market won’t just be looking at sales growth vs peers. A clean comparison of HEPS growth is now possible, making it likely that the market will increasingly judge Boxer’s performance on the delivery of earnings rather than the promises of future growth.

Disclosure: The Finance Ghost does not hold a position in any of the aforementioned retailers at the time of writing, other than SPAR. BROKSTOCK, its employees, representatives or related parties may hold positions in the financial instruments discussed.  

(1)     Boxer financial results for the 26 weeks ended 30 August 2026

(2)     Moneyweb data, accessed on 14 October 2026

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