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PEP and Ackermans-owner Pepkor reported a double-digit fall in earnings on Tuesday as cash-strapped South Africans focused on buying essentials and held back on more discretionary items such as clothing.
Also, its summer clothing range did not go down well with shoppers. The company said in a statement:
The JSE-listed retailer, which also owns Tekkie Town and JD Group, among other brands, reported a 4% increase in revenue to R43.8 billion in the six months ended March, but saw operating profit decline 9.8% to R5.1 billion and headline earnings per share slide almost 12%.
Like-for-like sales fell 2%, weighed down by an 8.3% fall at Ackermans, while Pep grew sales 0.5%.
Pepkor CEO Pieter Erasmus said high levels of unemployment, rising inflation and disruptions in social grant payments are hitting consumer spending, adding customers "are telling us that they are compelled to prioritise their spending on essential items."
"The situation has been further exacerbated by electricity load shedding, which sees many customers not able to earn a full wage. Their shopping patterns are also disrupted as they have to travel further to shopping complexes which can operate during load shedding - resulting in increased spending on transport.”
Some 74% of its store base now had alternative power sources to cope with load shedding.
Pepkor said its brands also managed to gain market share in key product categories. PEP increased its market share in the babies, ladies and home product categories, while Ackermans did the same in schoolwear and lingerie. JD Group also gained market share in computing, appliances and audio.
The company said it the group's total share of the South African clothing market continued to exceed pre-Covid-19 levels, while it sold seven out of 10 prepaid handsets in the country.
It was also pressing ahead with store expansions, opening 168 new stores (net 99 after taking closures into account). This brought its store footprint to 5 929 stores.
Pepkor also said "further progress was made from a portfolio optimisation and capital allocation perspective" flagging that its Dealz discount brand had been closed down during the period and that PEP Africa planned to exit from Nigeria.
Shares in Pepkor had slipped more than 5% in early trade on Tuesday and have fallen more than a quarter so far in 2023.
Click here for details of the company's shares as well as other info.
