Pepkor Holdings expects Covid-19 to impact on business

By Philippa Larkin Time of article published Mar 11, 2020

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JOHANNESBURG - Pepkor Holdings is expecting the Coronavirus (Covid-19) to effect its business in the second half to end-September due to the lag effect in the supply chain resulting from interruptions in production in China.

Leon Lourens, the chief executive retailer Pepkor, at its annual general meeting on Wednesday said the impact of the Coronavirus had not been significant on group sales in the year-to-date, but would impact on the second half of the current financial year  

Pepkor, a subsidiary of Steinhoff International, has a portfolio of retail brands, such as Pep, Ackermans, Tekkie Town, Bradlows and HiFi Corporation.

"Most of Pepkor’s retail brands source products from China and interruptions in production will in all likelihood lead to temporary shortages on certain stock
items. Certainty on the exact impact will only become clear once most factories resume normalised production levels," he said in a Pepkor statement released on Wednesday.

However, Pepkor’s defensive business model would count in its favour to reduce the risk and impact on the group,  Lourens said.

"The bulk of Pepkor’s product range is defensively skewed towards basic, everyday products which are sourced well in advance of it being required in-store. This results in fairly long supply chain lead times, allowing our buying teams, in collaboration with our long-term loyal suppliers, the opportunity to tactically respond and put measures in place to mitigate any negative impact," he said. Management expected interruptions to its product availability, but
remained optimistic that customer service levels in the respective retail brands would be largely maintained.

As regard trading, Lourens said consumers had remained under financial pressure in the current economic environment and trading remained volatile.

Trading during January was stronger in both Pep and Ackermans, which achieved double-digit growth in sales on the back of the shift in “back to school”. This was followed by 

weaker trading in February and brought  year-to-date performance largely in line with that what was reported during the first quarter.
Trading in both JD Group and The Building Company was weaker during January and February in context of the continued challenging trading environment for durable and building material products.

High unit prices and the challenges in the construction industry continue to  impact on the businesses in these divisions, Pepkor said.


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