Value apparel retailers are increasingly outpacing their mid-market and premium peers in both sales growth and share price performance, as South African consumers under sustained financial pressure gravitate towards cheaper, essentials-driven ranges.
A weak economy has pushed both lower- and middle-income shoppers towards affordable basics, benefiting retailers with scale, simplified formats and disciplined cost structures. These operators focus on high-volume, low-margin models anchored in everyday essentials rather than high-risk fashion, enabling them to turn stock faster, avoid heavy markdowns and preserve margins.
The shift in spending behaviour is increasingly looking both cyclical and structural. In tough conditions, shoppers prioritise affordability over discretionary fashion, while structurally, middle-income consumers are steadily migrating towards value formats.
And Pepkor leads the pack. Within its stable, Pep and Ackermans continue to outperform through basics-led assortments and limited fashion risk. The resilience of the informal economy has reinforced the group’s position, with Pepkor one of the few formal retailers able to profitably serve these markets at scale.
Its dense store footprint in commuter nodes, townships and rural towns positions it close to where demand is strongest. The group now has 6,000 stores nationally and increasingly uses them as multipurpose service hubs, underpinned by fintech capabilities and ambitions to establish a bank.
For the year ended September, Pepkor delivered strong results: revenue rose 12% and operating profit increased 13.2%. Pep achieved like-for-like sales growth of 9.3%, with total sales up 10.8%, while Ackermans’ like-for-like sales grew 7.1%. The group is pursuing further acquisitions across homeware and mens- and womenswear.
Analysts note that Pepkor benefits, first, from aspirant middle-class consumers trading down. Second, improved sourcing and broader adoption of mobile payments have helped to formalise spending at the lower end of the market, pulling more consumers into Pepkor’s ecosystem.
Robbie Proctor, executive director at I&M Financial Services, says Pepkor in particular is benefiting from a consumer segment that historically operated outside the formal retail economy and typically bought from informal street vendors.
At the lower end of the market, consumers are also benefiting from easing food price inflation, which makes up a far larger share of their spending basket. “We’re also seeing easing in some agricultural commodities like wheat, maize and rice,” he says.
“In some sense, there’s less pressure at the very low end, while the middle class is taking the biggest hit. At the top end, asset-owning consumers still have some offset from global and local equity markets,” Proctor says.
He describes Pepkor as the winner at this juncture, even though it comes off a tough comparison base: a year ago, the group benefited from the introduction of the two-pot retirement system, which boosted basket values though unit volumes were flat.
Value apparel retailers such as Pick n Pay Clothing and Pep are steadily gaining market share at the expense of Truworths and TFG, says Casparus Treurnicht, portfolio manager at Gryphon Asset Management. The core customer base for Truworths and TFG remains the aspirant middle class, which is most under pressure due to competitive forces and macroeconomic changes, he says.
“Pick n Pay Clothing is performing exceptionally well,” he says, noting that offshore online platforms such as Shein and Temu are targeting the same customer base as Truworths and TFG: shoppers with a fixed address, time and resources.
In some sense, there’s less pressure at the very low end, while the middle class is taking the biggest hit
— Robbie Proctor
Treurnicht adds that South African consumers are extremely price-conscious, which naturally favours value retailers. As temporary tailwinds such as the two-pot withdrawals and easing inflation fade, even more consumers are migrating towards value.
Meanwhile, Mr Price is facing stiffer competition as consumers shift decisively towards essentials. It has warned that consumers remain under pressure.
In the half-year to September, group revenue rose 5.4% to R18.6bn. In-store sales grew 5.4% and online sales 9.7%.
Mr Price is focusing on margin-accretive market share gains. The group has delivered positive earnings growth for four consecutive reporting periods, while the rest of the market has been more variable. Last year, Mr Price’s share price was up 85%, hitting a record high in November.
The apparel segment, which accounts for almost 80% of group sales, grew 5.3%. The group remains debt-free, with about R3bn in cash to fund capex and potential acquisitions, which CEO Mark Blair said are unlikely to be in Africa. Cash sales accounted for 88.2% of retail turnover, highlighting alignment with value-conscious consumers.
Jet’s turnaround under TFG has further strengthened the value segment. The chain benefits from TFG’s supply chain investments, while retaining its sharp price-sensitive positioning.
Nedbank senior equity research analyst Paul Steegers says that on balance, value apparel retailers are outperforming their peers. While TFG has gained market share in womenswear, it is lagging in menswear, where its exposure remains skewed towards more upmarket brands such as Markham and Fabiani.
Truworths, he says, is positioned at a higher price point and has “possibly lost some of the fashionability trend in its brands — and it hasn’t pushed credit”.
TFG’s core fashion brands continue to execute operationally but remain exposed to a more volatile, fashion-led product mix and weaker discretionary demand. While the group’s vertically integrated, quick-response model is an advantage, it does not fully offset pressure on higher-ticket categories.
Truworths is particularly vulnerable because of its more upmarket positioning and greater reliance on credit sales. Affordability constraints are tightening, new account growth remains muted and consumers are hesitant to commit to higher-priced fashion purchases.
Industry data supports this divergence. NielsenIQ notes that consumers are increasingly prioritising value, private-label and discount formats, with value-orientated chains showing greater resilience than retailers positioned slightly higher on the price spectrum.
Research also highlights that retailers such as Pepkor avoid the “fashion risk” that undermines traditional fashion-led models. They operate the lowest cost structures among peers, enabling profitable expansion into rural and township markets.
The underlying driver remains intense pressure on the middle class, which is bearing the brunt of rising electricity costs and rates as well as broader inflation; spending in the middle of the market is being “hollowed out”.
China-funded e-commerce retailers Shein and Temu have captured a combined 3.6% share of South Africa’s retail, clothing, textile, footwear and leather market, accounting for R7.3bn in sales last year, according to a report from consultancy BMA. Still, there are suggestions the impact is levelling out; Blair said at the group investor presentation recently that the online operators have been losing market share over the past few quarters.
Without a meaningful shift in economic growth, regulatory reform and job creation, analysts believe the competitive gap between value and mid-market apparel retailers is likely to persist. While premium players could benefit from stronger macro conditions or product missteps by value chains, the current environment firmly favours low-cost, essentials-led retail.
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