Sales growth has halved and shelf prices are still falling at discount retailer Boxer — yet the group grew profit at double digits, just as the CEO who has been at the group for 33 years prepares to leave.
Marek Masojada will retire when the financial year ends. His successor is Justin Galloway, head of the group’s supply chain. In March, he takes over one of the most highly rated food retailers in the country, which is at the same time a business being sorely tested.
In the 26 weeks to August 30, turnover rose 6.3% to R24.1bn, less than half the 13.9% of a year earlier. Like-for-like growth was a subdued 1.4%. Yet profit before tax and capital items climbed 10.6% to R774m. Investors will be watching whether this can be repeated.
Headline earnings rose 9.1% to R565m, and headline earnings per share grew 9.2% to 124.83c. This is the first clean comparison since the 2024 listing, now that share count distortions have washed out. The interim dividend was upped to 49.93c per share from 45.30c on an unchanged 40% payout policy.
The big takeaway from these results is Boxer’s ability to protect and even expand margins while cutting prices. Gross margin widened from 20.2% to 20.7%, despite cheaper shelf prices; better mix, scale and less wastage and shrinkage helped. Trading expenses grew 10.2%, faster than turnover, on energy, new stores and advertising. But other trading income jumped 34.7%, to 1.1% of turnover, and trading profit rose 8.1% to R1bn — a decent 4.2% margin.
Management says it would rather hold margins or even give some back and chase volume. In normal times, Masojada tells the FM, other income would be ploughed back into gross margin to drive double-digit sales growth. “But the diesel costs and the environment are just not allowing that to happen.”
Boxer’s internal selling prices fell 2.4% over the half, deepening from a 1.2% decline last year and hitting -3.1% in August. Shoppers are getting more bang for their buck and volumes are healthy, but it’s tougher for the retailer to grow turnover.
The wider market is in the same place. Stats SA recorded food inflation of 0.9% in July, the lowest in more than 16 years, though it quickened in August for the first time in nine months. Shoprite reported internal inflation of 0.8% for its year to June, so Boxer is cutting deeper than its biggest rival.
Is the worst over? Management thinks so. The price of maize is 16% lower (down from 29% in January) and flour has returned to last year’s level. Masojada expects inflation to turn positive between the end of this year and the first half of 2027.
The biggest concern is fuel. Boxer’s diesel bill rose 32.4% to R174m in the first half, and suppliers have started asking for price increases. Boxer and its suppliers have absorbed much of the extra cost so far, but Masojada says increases are now coming through and some will reach shoppers. With the November election adding to uncertainty, management says trading remains difficult to predict.
“Some help from the external economy would be good,” Masojada says, though he has no high hopes. A little inflation might help Boxer trade, even if it hurts the consumer. The best news for Masojada would be an end to the conflict in the Middle East and relief at the pump. “We’ve been really hoping for that, and it just seems to be getting worse.”
Masojada says the growth split shows the strain on the consumer: 1.4% came from existing stores and about 5% from new ones. It is the number he watches for the health of the business. KwaZulu-Natal, the group’s heartland, accounts for perhaps 20%–25% of sales. Boxer is represented in all nine provinces. “We are properly diversified,” he says.
Anchor Capital’s Steph Erasmus says Boxer is doing its job, but the valuation bothers him. “It’s a bit rich, given the results and outlook commentary.”
Operationally, he has little to fault. “I think they’re delivering,” he says, adding that management has communicated well. “The rollout is picking up pace and management has a clearer view of when liquor licences will land, so new shops should open with liquor from day one. Even the leadership handover is unremarkable.”
The trouble starts with how the margin is being built. On forward earnings, Erasmus contends that Boxer looks expensive next to its listed peers. “Is it warranted, trading at an elevated multiple, given all the uncertainty?” he asks. Other income is supporting trading profit, but management is reluctant to give more detail, “which I understand given the competitive sensitivity”. Guidance points to a lower trading margin and management has said it will reinvest in price. “I wouldn’t expect elevated trading margins to hang on forever,” he says.
Boxer ended the half with no long-term bank debt, having repaid its borrowings. Net cash before lease liabilities reached R2.3bn, from R1.1bn a year ago, and free cash flow was about R750m. Capital expenditure fell 40% to R320m because last year’s distribution centre fit-out did not recur. But it will climb again with store openings.
The cash is also funding a drive to earn revenue from more than food. Other income was helped by value-added services, the B-Inside supplier data insights platform and the first contributions from B-Media, which launched with the Nyama Battle street-food TV series. CFO David Wayne noted in the investor presentation that the programme’s costs are matched by media income. The B-Inside portal features AI tools for analysing retail data, a customer data platform is about to go live, rewards membership has reached 3-million and a Baby Club was launched for young families. Analysts pushed for targets in the investor presentation, but management offered none, saying only that the runway is significant.
Boxer reached 600 stores in August, having doubled its estate in 6½ years. It opened 24 in the half and is on course for about 60 across its formats this year, with nine more confirmed for October. Capex guidance stays at R1.1bn.
The pipeline of approved sites secures superstore expansion for at least the next six years, and Masojada sees room for more expansion over the next six or seven years, perhaps at a faster rate. The liquor push continues too: 64% of stores now have a liquor outlet, up from 58% a year ago.
Succession
Of course, the niggling worry will be the departure of the long-serving Masojada. “It’s time,” he says. His reasons are part personal, part corporate. He’s ready to travel and slow down, and his position has allowed little of either. “There’s no off button [at the job]. It’s 365, 24/7, and it’s highly pressurised in every possible way.” Boxer employs 38,000 people across 600 stores — and the daily churn of challenges, he says, “would make everybody’s hair stand on end”.
He wants to work in “a smaller, quieter way”, perhaps alongside his entrepreneurial children, and does not see himself in a formal corporate setting again. He says he would be leaving even if Boxer had remained private. Succession has to be proactive, he argues, and Boxer is “lucky to have great internal people”. He stays on in a supporting role until November 2027.
Galloway, 44, is a chartered accountant who spent three years handling Boxer’s external audit before joining in 2012. He has worked in finance and store operations but made his name over the past nine years building the group’s supply chain from scratch. In 2016, he and Masojada toured Poland’s large-scale discounters and brought home many of the ideas Boxer still runs on.
The board, in other words, has chosen a person who understands how cheaply a bag of maize meal can travel from factory to shelf. With diesel climbing and margins deliberately thin, that says where it expects the next fight to be won.
Boxer has shown that its discount model can grow profits and generate cash even when sales growth slows. Galloway inherits that track record, a strong pipeline of new stores and a tougher challenge. A model built on selling more at lower prices must now prove it can maintain profits as costs rise, prices are kept low and expansion continues.
Masojada considers AI as his successor’s defining challenge and opportunity. It will automate and digitise parts of the business, he says, and give “exceptional” insight into consumer behaviour and promotional patterns. Boxer is investing in technology and making sure its data is safe and reliable. “We need to scale it now.”
