South Africa’s Budget Fashion Giant Sees Profits Surge

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South African retailer Pepkor Holdings on Friday reported a 115.2 percent jump in annual earnings, rebounding from a low base in 2020 when it was hit by coronavirus lockdown restrictions.

South African clothing retailers have been hit hard by initial Covid-19 lockdowns in April and May 2020 when they were forced to close shops, and also the subsequent waves of Covid-19 infections. In addition, millions of job losses constrained discretionary spending while restrictions on events dampened demand for formal clothes.

But Pepkor has benefited from its focus on budget-conscious consumers, which include more than 17 million South Africans on welfare and special Covid-19 grants.

Pepkor, majority owned by Steinhoff, said it had succeeded in not only restoring but comfortably surpassing pre-Covid 2019 profitability levels.

Headline earnings, the main profit measure in South Africa, rose to 5 billion rand ($320.1 million), up from 2.3 billion rand a year ago, while operating profit rose by 40 percent to 9.3 billion rand.

Revenue growth of 77.3 billion rand was up 9.2 percent as the company significantly increased market share.

The retailer said revenue at its biggest division, clothing and general merchandise, rose by 8 percent, with the Pep and Ackermans clothing brands reporting sales growth of 9.5 percent.

The furniture, appliances and electronics division, which includes the JD Group, Incredible Connection and Hi-Fi Corporation brands, increased revenue by 13.8 percent, driven by technology upgrades and home improvement demand as people worked and studied at home. Revenue at its building materials division rose by 17.7 percent.

Pepkor said supply chain disruptions had impacted the group, resulting in increased costs and delays in product inflows.

“The backlog has been improving and stock levels are expected to normalise for the December trading period,” Pepkor said, adding that higher levels of inflation are expected towards the end of 2022.

Reporting by Nqobile Dludla; Editing by Jacqueline Wong and Jane Merriman

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