Withdrawals from the Two-Pot retirement system are likely being used to purchase clothes, analysts said yesterday, highlighting that this was set to influence financial performance for clothing retailers such as Pepkor Holdings, which posted steady returns for shareholders despite a slight decrease in headline earnings per share (HEPS) for the year ending 30 September.
Pepkor, which owns retail shops like Ackermans, Hi-Fi Corp, Bradlows and Tekkie Town among others, yesterday declared a 48.5 cents dividend for the period, which will be payable in January next year despite a R2.7 billion impairment for its clothing, general merchandise and footwear businesses.
About R2.4bn of the total impairments for the period is attributable to the clothing and general merchandise, while R161 million relates to newly acquired S’Ya Phanda and Pepkor cellular sourcing activities.
The group said key factors for the impairment “include the continued uncertainty of trading in the retail market driven by performance in Ackermans, which continues to recover, and a challenging footwear market impacting performance in Tekkie Town and Shoe City, resulting in a cautious” outlook.
Although Pepkor recorded a 7.8% growth in revenue to R85.1bn, the company had a 0.4% decrease in HEPS 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, yesterday said this financial performance reflected “steady returns for shareholders” for the company.
However, it was not all good news for Pepkor as it faced a tough second half of the year, with “supply chain disruptions and late winter season impacting performance,” added Davies.
Other analysts are expecting Pepkor and other clothing retailers such as Mr Price to benefit from a once-off withdrawals from the Two-Pot retirement system, which kicked off at the beginning of September.
Market analyst Dave Hazelwood said yesterday that post the reporting period, the rise in sales for Pepkor could have been influenced by Two-Pot withdrawals.
“Judging from Mr Price and Pepkor’s post-period sales, people who withdrew pension funds from the Two-Pot system are spending it on clothes. One-off that will distort the next period results,” said Hazelwood.
Pepkor said that in the seven weeks up to 16 November post its September full year, there was “a strong improvement” in sales volumes.
In the full year to September, PEP 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 also showed good progress in recovering like-for-like sales at substantially improved gross profit margins driven by higher full-price sales.
“Market share gains were achieved in the babies, kids and school categories. The transition to the new Hagley distribution centre in Cape Town was seamlessly completed and the Ackermans team was further enhanced with additions in key functions to strengthen execution,” explained Pepkor.
This came as the clothing and general merchandise segment (CGM) increased revenue by 5.2% to R61.4bn while the furniture, appliances and electronics segment (FAE) also raised revenue by 4.5% to R11bn.
BUSINESS REPORT