Our opinion on the current state of PEPKORH(PPH)Pepkor Holdings (PPH), previously known as Pep, is 71.01% owned by Steinhoff International. Following the collapse of the Steinhoff group due to admissions of "accounting irregularities," the directors of Pep decided to change their name back to Pepkor Holdings to avoid negative publicity. The group includes Ackermans, PEP Stores, Bradlows, and HiFi Corporation. Since the problem began in December 2017, and with the COVID-19 pandemic, the share price fell as low as R10 per share in May 2020. Over the next year, the share staged a remarkable recovery, more than doubling.
The company raised R1.9bn in an accelerated book-build, with the proceeds used to reduce debt as a precautionary measure. On 3rd February 2022, the company announced the acquisition of 87% of the Brazilian clothing retailer Avenida. On 13th April 2022, the company announced that its Isipingo distribution center had suffered significant damage due to the flooding in the Natal area and had to be temporarily closed. The company has adequate insurance to cover the damage.
In its results for the six months to 31st March 2024, the company reported revenue up 9.5% and headline earnings per share (HEPS) down 3.8%. The company said, "Sales growth strengthened further in the second quarter - Market share expansion on three-, six- and 12-month basis (Retailers' Liaison Committee (RLC) March 2024) - Recovery in retail gross profit margin - Avenida expansion accelerated and ahead of plan."
Technically, the share has been moving sideways and downwards since November 2021 and remains vulnerable. Despite this, Pepkor Holdings is seen as a good quality investment, but it is potentially vulnerable to lower levels of consumer spending. Investors should consider the broader economic context and the company's exposure to consumer behavior, especially in times of economic uncertainty.