The “credit interoperability strategy” at Pepkor is quite a mouthful. It’s also an exciting part of the business, driving credit sales across multiple business lines and product categories. From cellular to clothing, Pepkor is using credit sales as a growth engine.
As interesting as this is, there’s an argument to be made that it overshadows the significant recent dealmaking at the group and the strides it is making in how it is positioning its traditional retail offering.
The credit strategy only works if there are products people want to buy. As Pepkor improves and broadens its offering, the seeds it has planted in credit sales should blossom. The innovative DNA that permeates the fintech offering — for example, credit enablement and value-added services in the informal market — is therefore only one part of the story. It’s crucial that Pepkor also gets the basics right across its various retail brands.
A simple offering doesn’t necessarily create a simple business. Even though a chain such as Ackermans is focused on basics, it still got things wrong in 2024 and Pepkor ended up recognising substantial impairments. Fortunately, there was a strong recovery in that business in the six months to March 2025.
Speaking of Ackermans, evidence of Pepkor’s strategy to win more market share in clothing for adults (on which it is underindexed, while being overindexed on childrenswear) is the rebranding and repositioning of Ackermans Woman as Ayana. It has the likes of Zara firmly in its sights here, targeting mid- to upper-income shoppers with a range that is updated more frequently than would be the case in Pepkor’s traditional basics-focused offering. It’s still very early days, with the launch of the brand through 32 revamped stores in February. Keep an eye on this.
To add to organic initiatives in which Pepkor is optimising and tweaking what it already has, the group is also busy with substantial acquisitions. In March, Pepkor announced the acquisition of several brands from Retailability, the group that acquired Edgars out of business rescue (you may recall that Jet, the other major part of Edcon, went to TFG).
Retailability is disposing of Legit, Style, Swagga and Boardmans to Pepkor, leaving it with Edgars, Edgars Beauty, Kelso and Keedo. The acquired brands will sit in Pepkor Speciality, adding scale to that business and giving it the opportunity to rationalise brands and distribution. Importantly, this acquisition is well in line with the broader discount and value model that Pepkor has been built around.
If you can believe it, there’s more in terms of deals — the acquisition of Choice Clothing, announced in November 2024, was concluded in May
If you can believe it, there’s more in terms of deals — the acquisition of Choice Clothing, announced in November 2024, was concluded in May. It will have been implemented by the time you read this. This is an off-price model, which means highly opportunistic buying of surplus product in the market and an ever-changing range. This is a totally different type of supply chain from the less fashion-focused offerings such as Pep, so Choice is being kept separate within the group to avoid it losing its entrepreneurial edge in its buying strategy.
Pepkor is clearly on a growth trajectory, with the layering of the credit strategy on top of these chains. With local retailers currently telling a story of strength in credit books and strong demand from consumers (Lewis is another prime example right now), this positions Pepkor favourably.
The first half of the year was an excellent foundation for the financial year, with headline earnings per share up 12.4% without adjustments, or 18.9% on a normalised basis allowing for a lower effective tax rate in the previous year. It is seeing solid growth across the segments, with gross profit margin also picking up thanks to the higher mix of fintech revenue.
The blemish on the numbers is Avenida, where like-for-like sales dipped 1.8% on a constant currency basis. Total sales growth of 12.1% (driven by new store openings) is flattering the Avenida story, as there are issues in the underlying business. There are a number of management interventions taking place here, with Pepkor having now increased its stake in the Brazilian business to 94.75%.
Overall, Pepkor is looking strong at the moment. It has a compelling story across elements such as online and credit sales. The fintech business is effective and ready to be rolled out across incoming stores. Perhaps best of all, the only offshore exposure right now is Avenida, which is small in the group context.
Pepkor has seen what so many others have failed to recognise: there’s still a significant growth opportunity right here in South Africa.
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