Pep announces 7% rise in revenue despite challenging retail market

Pepkor, owners of one of Nigeria leading clothing retail store, Pep and Ackermans brands, said it recorded a satisfactory results during the six months ended 31 March, 2019 amid shrinking consumer wallet and challenging retail market.

The company’s sales and earnings rose in the six months buoyed by market-share gains in clothing and merchandise. The clothing outlet also grew its market share in the period with the group’s retail store footprint expanding to 5332 stores, including 164 new store openings during the six-month period.

Group revenue rose 7 percent to R35.3bn. Excluding one-off items, operating profit increased by 6.9 percent to R3.4bn and headline earnings per share grew 3.4 percent to 52.4c. The company did not declare a dividend. Its PEP Africa contributed 3.4 percent to group revenue during the period and reported like-for-like sales growth of 10.8 percent in constant currency terms. While its operations in Nigeria performed very well as the dynamics of the local the market is better understood

With the clothing and general merchandise segment, the groups’ largest contributed revenue growth of 5.2 percent to R23.1bn and a 6.6 percent rise in operating profit to R3.1bn.

Its building-materials segment contributed a 1.5 percent increase in revenue to R4bn; it, however, had 66.9 percent fall in operating profit to R42m.

However, the devaluation of Angolan and Zambian currencies resulted in a sales decline of 3.4 percent in reporting currency terms. The business continues to focus on enhancing processes, systems, and efficiencies as it consolidates its base. Zimbabwe remains a concern and operations have been intentionally slowed down while viability is assessed and risk is managed.

The retailer, previously known as Steinhoff Africa Retail, said its “defensive market positioning”, partly hinged on competitive prices, boosted growth.

“Management remains cautiously optimistic about the retail environment and expects improved consumer confidence following the completion of SA’s elections,” it said.

The group expects to grow its store footprint, with space growth in the financial year 2019 of between 3 percent and 4 percent on a net basis.

Pep’s growth in Nigeria has been further hampered by booming second hand clothing market over the last couple of decades in major cities across the country, dominated by low-income earners and part of the shrinking middle class that can no longer afford brand new clothing.

The second hand clothing sector has often been criticised for contributing to the tepid growth of the retail and garment production industry in Nigeria. Despite efforts by the government to regulate it, the business is still thriving and textile manufacturers in the country struggle with limited capacity for clothing production, poor patronage, and meagre purchasing power.


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