Pepkor has boosted its portfolio with the acquisition of Choice Clothing, a discount retailer that has more than 100 stores in South Africa and Namibia.
Choice Clothing trades under the Choice Clothing and Big Daddy retail brands in the the two countries, respectively. It provides fashion apparel “at the lowest prices” and is focused on adult product offerings.
The acquisition, announced yesterday, has bolstered Pepkor which has been seeing revenue surges. It comes at a time interest rates are falling, inflationary pressures are easing, and South African consumer sentiment is firming up.
“With Pepkor’s strong market share in babies and kids wear, the acquisition of Choice Clothing builds on its strategy to expand participation in adult wear, where the group’s market share is under-indexed,” said Pepkor yesterday.
Although Pepkor on Tuesday reported a 7.8% growth in revenue to R85.1 billion for the year to end September, headline earnings per share in the company decreased 0.4% to 140.2 cents for the full year.
Gross profits grew 13.5% R32.6bn while operating profits were 8.4% stronger for the year under review at R9.8bn.
Greg Davies, head of wealth at Cratos Capital said this financial performance reflected “steady returns for shareholders” for the company.
With Choice Clothing positioned at the bottom-end of the discount market, Pepkor is preparing for the new acquisition to be “a high growth segment that bridges the gap between the formal discount and informal” markets.
“This acquisition is therefore highly complementary to Pepkor’s current expansive retail footprint and will further strengthen the group’s ability to reach customers in the formal and informal market with the absolute lowest prices,” the company added.
Moreover, Choice Clothing “is scalable with expansion” potential.
It is expected that the brand will be able to benefit from Pepkor’s scale and core competencies in merchandise, sourcing, supply chain, distribution and properties.
The acquisition of Choice Clothing is, however, still “subject to the fulfilment of conditions customary for a transaction of this nature, including the relevant regulatory” approvals.
“The acquisition of Choice Clothing represents an exciting opportunity for Pepkor to reach even more customers in the discount and informal space, enabling us to grow our share in the adult wear market,” said Sean Cardinaal, chief operating officer for Pepkor.
“While the Choice business may be small in comparison to other Pepkor businesses, this is a business which we can grow aggressively by leveraging our scale and capability to potentially triple the retail footprint in the medium term.”
In the full year to September, Pepkor’s PEP division expanded market share with a positive trajectory in like-for-like sales growth delivered throughout the year while higher full-price sales improved the chain’s gross profit margin.
Ackermans, its other clothing operation, also showed good progress in recovering like-for-like sales at substantially improved gross profit margins driven by higher full-price sales.
BUSINESS REPORT