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Pepkor raises full year revenues by 7% as it expects lower earnings

PEP retail store in Clanwilliam, in the Western Cape. Picture: Henk Kruger/Independent Newspapers

PEP retail store in Clanwilliam, in the Western Cape. Picture: Henk Kruger/Independent Newspapers

Published Nov 3, 2023


South African consumers are facing elevated financial pressures due to the rising cost of living, said Pepkor, which runs clothing and apparel retail outlets such as Pep and Ackermans, as it reported a 7% rise in revenues for the full year period to end September 2023.

The rise in group revenue for the full year period to R87.4 billion was on account of market share gains from PEP in the babies’ category and stronger gains by Ackermans in school-wear and lingerie. The JD Group also expanded its market share in the computer and audio segment.

“Customers continue to face financial pressure due to high living costs. Their ability to earn an income remains negatively impacted by high unemployment, continued electricity supply interruptions as a result of load shedding and disruption in the payment of social grants,” Pepkor said yesterday.

Shares in the company inched up by 4.39% on the JSE to R18.06 yesterday as it reported that the Avenida business in Brazil, which it acquired in February last year had bumped up its contribution to group revenue to 4.3% compared to 2.4% last year.

With revenue underpinned by a stronger performance in its second half period, merchandise sales across the group were 7.9% higher for the year.

In spite of economic difficulties being faced by South African consumers, cash sales for Pepkor increased by 5.6% during the full year period under review. The strained economic situation facing consumers however reflected in a 35.6% increase in credit sales as the group implemented a credit interoperability strategy for the market.

Nonetheless, cash remained king for Pepkor as 90% of its sales are still cash based. It said “credit continues to be granted on a prudent basis” within its conservative credit methodologies. Against the background of higher inflation and soaring interest rates, the retail selling price inflation for PEP and Ackermans amounted to 7.3% for the year.

Pepkor opened a total of 324 new stores during the year to September 2023, bringing its footprint to 5 917 stores. It however closed the Dealz discount variety format in South Africa and Giovanna footwear stores in Brazil while it also exited from Nigeria.

Pepkor’s financial services unit benefited from its credit interoperability strategy and a high interest rate environment. There were 794 000 new accounts for Tenacity, which provides in-store credit cards as cross-shopping by customers cascaded across the group’s retail brands.

“Collections, non-performing loans and provision levels remain well within tolerable levels across all credit books. Credit book growth has, however, resulted in increased debtors’ costs for the year,” the company said.

During the year under review, Pepkor suffered an impairment of R703 million attributable to Tekkie Town. About 90% of this has been attributed to “softer performance in a highly competitive branded footwear market” with the remaining 10% is attributable to a higher weighted average cost of capital.

Headline earnings per share for the full year from continuing operations were expected to soften from 163.1 cents last year to between 138 cents and 154.6 cents, Pepkor said in its trading update.

Based on its credible operating performance and strong cash generation during the year,” the board of Pepkor said it would still consider a dividend for the period, despite impairments suffered for the period.

“The impairment will therefore not negatively impact any dividend declared for FY23.”