Pepkor resumes store-opening drive

Pepkor resumed its expansion push as Africa’s biggest clothes retailer looks to tap rising demand for low-cost apparel and malls look for tenants.

The owner of the Pep and Ackermans chains opened 108 new South African stores during the six months through March and plans to more than double that in its second half, the Cape Town-based company said in a statement on Thursday. That would bring the total to about 5 700 across the continent.

“We’ve decided to go full speed again on openings,” Chief Executive Officer Leon Lourens said by phone.

Pepkor pulled back growth plans last year due to the Covid-19 pandemic and associated lockdowns, but is now benefiting from shoppers looking for lower-priced outfits better suited to declining household incomes, he said.

Another boost has come from large shopping centers in South Africa, Pepkor’s biggest market, which are casting a wider net for tenants after a number of corporate failures left them with vacant spaces.

Pepkor, primarily known for its baby and children’s clothing, opened a Pep store in the upmarket Canal Walk mall, Cape Town’s largest shopping center, which would have considered the chain too down market before the pandemic, the CEO said.

“Since Covid, they agreed to take us and that’s now one of our top ten stores within a year,” Lourens said.

While the economic impact of Covid-19 will continue to affect consumer spending, Lourens is confident that Pepkor is well placed to ride out the downturn. The shares climbed as much as 5.7% and traded 5% higher at 18.67 rand as of 11:16 a.m. in Johannesburg, bringing its gain this year to 37%.

Here are more highlights from the interview:

Takeovers

The company has reduced debt and improved its cash position and is looking for acquisitions. “We’ve got to build for growth in the future,” Lourens said. “There aren’t so many brands available in South Africa. It may not even be in traditional clothing retail.”

“If we don’t find the right opportunities we then have dividends and share buybacks as an option,” he said.

Online sales

Outside of Pepkor’s electronic stores, which sell as much as 10% of stock online, the company has little in the way of internet retail.

“In South Africa, online hasn’t really taken off as much as it has in other parts of the world and we’re in no rush,” Lourens said. “When you sell low-priced items, it can cost you three times the price to get it to the customer, so then you are less likely to drive online too hard.”