Pepkor sales growth slows due to floods and social grant disruption

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The discount fashion and homewares retailer, majority owned by Steinhoff International Holdings, had posted sales growth of 27.9% in the prior year's third quarter as the group recovered from the Covid-19 lockdown.

The government introduced the so-called social distress grant in 2020 to help people cope with the economic effects of the Covid-19 pandemic. This fuelled spending at the discounter's shops that offer value items to cash-strapped shoppers.

But payment of the grants was disrupted in recent months due to administrative changes, sending a shockwave through the retail sector.

Pepkor said problems in the payment of grants had a significant impact on trading in May and June, which negatively impacted performance in its clothing division, especially the Pep and Ackermans chains. Pepkor said payments had resumed, including back payments.

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For the third quarter, sales in Pep and Ackermans stores inched up by 1.7%. Trading was also impacted by the flooding of its Isiphingo distribution centre in April.

"The distribution centre is currently operating at 50% of normal capacity. This is expected to increase to 80% within the next month and service levels are almost back to normal," Pepkor said.

Category sales

Clothing and general merchandise sales rose by 9.7% in the quarter. Furniture, appliances and electronics sales increased by 3.7% against a strong base in the prior year due to pent-up demand.

Building materials sales fell by 1.9% as the market in South Africa continued to be constrained.

For the nine months ended 30 June Pepkor said sales rose by 3.9% to R62.5bn versus the comparable prior year.