Pepkor profits take a hit

Despite a decent increase in revenue, Pepkor’s profit slumped by over 17% in its latest interim results, largely due to the hit it took on the sale of The Building Company.

Pepkor – which owns well-known brands such as PEP and Ackermans – released its results for the six months through March 2024.

The results revealed a 9.5% increase in revenue, driven by robust trading in the company’s traditional retail segment, which strengthened further into the second quarter. 

In addition, the retailer said the Easter trading period was successful on a comparable basis with double-digit sales growth achieved by PEP, Ackermans and Speciality and high single-digit sales growth in JD Group. 

The retailer’s overall market share expanded on a three-, six-, and 12-month basis.

The company said its retail gross profit margins benefited from improved full-price sales with lower markdown activity in PEP and Ackermans. 

In addition, lower shipping costs in PEP further improved gross profit margins. 

Pepkor’s retail store expansion continued in the period with a total of 111 new stores opened, expanding the total retail store base to 5,823 stores.

Pepkor also reported strong growth in its FinTech segment, which saw revenue grow by 24.5% to R5.8 billion.

It said sales performance in PEP was underpinned by a successful back-to-school campaign, which strengthened sales growth in the second quarter. 

The PEP retail footprint was expanded to 2,597 stores. 25 new stores were opened during the period, driven by the PEP HOME format.

In addition, the PAXI parcel distribution service, which leverages the retail footprint of PEP and other Pepkor brands in more than 2,800 locations, increased parcel volumes by 17% to 2.7 million during the period. 

However, this strong sales performance did not aid the company’s profit for the period, which fell by 17.1%.

This is largely due to a loss suffered from the retailer’s discontinued operations, notably The Building Company.

On 29 February 2024, Pepkor entered into a sale agreement to dispose of The Building Company. The retailers recognised a loss of R396 million on the sale.

This led to a loss from discontinued operations of R294 million.