South African-based investment company Pepkor (PEP) expects higher levels of inflation to kick in next year after supply chain disruptions added to its woes, causing delays in product inflows during the year ended September 2021. Photo: Supplied
South African-based investment company Pepkor (PEP) expects higher levels of inflation to kick in next year after supply chain disruptions added to its woes, causing delays in product inflows during the year ended September 2021. Photo: Supplied

Pepkor flags higher inflation as it plans to open 300 new retail outlets in the new financial year

By Dineo Faku Time of article published Nov 22, 2021

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SOUTH African-based investment company Pepkor (PEP) expects higher levels of inflation to kick in next year after supply chain disruptions added to its woes, causing delays in product inflows during the year ended September 2021.

Chief executive Leon Lourens said on Friday that the backlog had been improving and stock levels were likely to normalise for the December trading period. “The group’s merchandise and logistics teams, in conjunction with its stable supply base, have done well to keep prices intact, but higher levels of inflation are expected towards the end of 2022,” said Lourens.

He said Pepkor was building on its existing local partnerships with strategic vendors to develop growth plans in support of its local sourcing and manufacturing strategy.

Pepkor, whose outlets were disrupted by the civil unrest in July, said it was cementing its position as the leading discount fashion retailer with plans to open 300 new retail outlets in the new financial year. The expansion came as group operating profit before capital jumped by 39.9 percent year-on-year to R9.3 billion and the group generated R77.3bn of revenue, up 9.2 percent when compared with the 2020 financial year.

Lourens said most of the new outlets would be opened under its most profitable brands, PEP and Ackermans. “We are prepared to further invest in these two brands, because of their strength and the robustness of their profitability model even in these uncertain times,” he said.

PEP and Ackermans continued to gain market share during the period and recorded a 9.5 percent growth in sales with like-for-like sales increasing by 7.5 percent compared to the 2020 financial year, said Pepkor.

Space expansion at PEP and Ackermans increased by 3.1percent year-onyear in the past year as 175 new stores were opened. “The objective is to keep gaining market share in the adult wear categories through the Pepkor Speciality business and Ackermans Woman,” said Lourens. Pepkor opened 247 new stores during the year ended September, pushing its store footprint to 5 470 stores.

However, the group disposed of the John Craig business, which included 111 stores, during the period under review.

Ten percent of the group’s total retail store base was disrupted during the civil unrest in KwaZulu-Natal and parts of Gauteng in July. One of the JD Group’s distribution centres in Cato Ridge, KwaZulu-Natal, was also looted.

Of the 549 looted stores, the group reopened 413 by last month and it was expected that 80 percent of the looted stores would be reopened by December, with the remainder delayed due to infrastructure rebuild or shopping complexes that had not yet reopened.

Financial highlights included the 115.2 percent surge in headline earnings at R5bn and the declaration of a 44.2 cents a share dividend.

“The 2020 financial year base includes disruption due to national Covid-19-related lockdowns where trading was restricted followed by strong trading attributed to pent-up demand from consumers,” said Lourens.

Lourens said the lower interest rates and reduced credit granting negatively affected growth in revenue earned from the Tenacity, Connect and Capfin credit books. Pepkor said cash sales increased by 10.6 percent and contributed 93 percent to group sales while credit sales increased by 11.2 percent.

Pepkor’s share price slid 2.78 percent to R23.47 on the JSE on Friday.

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BUSINESS REPORT ONLINE

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