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- Pepkor says like-for-like sales fell 1.4% during its quarter to end-December, weighed down by an 8% fall at Ackermans.
- The firm says this was due to suboptimal merchandise at Ackermans, not aligned with its offering of unbeatable value.
- But group revenue still rose 6.5% in the quarter, boosted by new stores and acquisitions, while it says its market share is still higher than pre-Covid-19.
- For more financial news, go to the News24 Business front page.
SA's largest retailer by store footprint Pepkor has reported a fall in like-for-like sales during the three months to end-December, amid a poor performance from overly pricey stock at Ackermans, while the hit from load shedding on the group more than tripled.
Group revenue rose 6.5% to R24.3 billion for the quarter, the firm said in an update on Monday, amid selling price inflation of about 5%, but like-for-like sales, which excludes the recent acquisition of Brazilian business Avenida, fell 1.4%.
Like-for-like sales at Ackermans fell 8% due to a suboptimal merchandise mix in its summer 2022 range which was "not aligned to its core value proposition of providing customers with unbeatable value." Pepkor said it had undertaken a review of its merchandising process in this regard where shortcomings were identified.
Pepkor’s group merchandise sales for the retail segments increased 7.7% for the quarter, however, rising 1.4% on a like-for-like basis at PEP. Although trading hours lost due to load shedding surged 221% year on year, the firm said its discount offering held up well in a high inflation environment, and its market share remains higher than it was before Covid-19.
During the quarter the retail segments opened a total of 132 new stores, or 112 on a net basis, expanding the retail store base to 5 942.
The company, which also owns Shoe City, JD Group and The Building Company, among other brands, also said that it remained highly cash generative with 91% of all sales still being cash sales. While cash sales only increased by 1.8% for the quarter, credit sales, excluding Avenida, jumped by 21%.
Pepkor noted that credit is not a significant sales enabler for the group, and that this growth in credit sales was achieved on a prudent basis. It added that "collections and non-performing loans remain at satisfactory levels across all four credit books".
READ | 'Our customers simply can't afford to pay.' Pepkor warns of pressure on households
Back to school
Pepkor said on Monday its clothing and general merchandise brands during January had been supported by a successful back-to-school season, with PEP, Ackermans and Shoe City all achieving double-digit growth in this trade, coming off a higher base in the prior year.
This was supported by the ability of these brands to offer value through its "unrivalled volume and scale of operations", it said, with the clothing and general merchandise segment increasing sales in January by 5.1%, and that like-for-like sales turned positive.
The Building Company’s performance was in line with expectations, while the JD Group reported weaker trading as demand for durable products deteriorated.
"Looking ahead, higher levels of inflation are expected in the coming winter season and customer affordability remains a key priority for merchandise teams."
The market reaction to the update was muted, with the company’s shares slightly down at R20.74 in late-afternoon trade.
Click here for more details on Pepkor's shares and other info
Jean Pierre Verster, CEO of Protea Capital Asset Management, said load shedding would have impacted Pepkor negatively, and contributed to like-for-like retail sales going backwards slightly, compounded by a disappointing performance from Ackermans.
But he said the good news was that even though the group had increased credit sales and loan disbursements, its collections and non-performing loans were at satisfactory levels across all its credit books.
He also took heart from increasing like-for-like trading in January related to back-to-school sales, saying they had managed this even as "load shedding so far this year being quite bad". This suggested that customers were adjusting to the load shedding across SA and still visiting stores.
FNB portfolio manager Wayne McCurrie said the update from Pepkor was reasonably good, even with the poorer performance from furniture and appliances.
McCurrie said the building segment was also "faring okay" considering it was coming off the high base created during the peak of the pandemic when people were forced to stay at home and opted to do a lot of building and home renovations.
"The outlook reasonably good for apparel and shoes, so it is not a bad update."
