Poor Clothing Choice Hurts Leading African Clothing Stores’ Profit

After Africa’s largest apparel retailer announced a decline in first-half profitability due to its failure to find the proper summer fashion mix, Pepkor Holdings Ltd. dismissed the president of its Ackermans division.

Pieter Erasmus, chief executive officer of Cape Town-based Pepkor, said in an interview Tuesday that the discount retailer, which began 100 years ago in rural South Africa and now has 5,929 stores in nearly a dozen countries, has hired “some new eyes from outside” to run the division as it also reviews package sizes of items like T-shirts and shorts.

Shoprite Holdings Ltd., Africa’s largest grocer, has lately built specialty clothes and infant stores in the same categories as Pepkor’s flagship Pep and Ackermans outlets, putting Ackermans under more intense competition.

“There are some very good competitors out there,” Erasmus added, mentioning the clothes division of Pick n Pay Stores Ltd. and Jet, which has better access to capital now that it was acquired by The Foschini Group Ltd. Without naming the individual, Erasmus said that the new Ackermans CEO had previously served as Pick n Pay’s chief operations officer.

New hires have been made to the women’s clothing team at Ackermans, “because that’s a key market share opportunity for us,” Erasmus added. He stated that a better performance is anticipated by the end of August and into the following summer.

Tuesday morning, Pepkor said that its net income for the six months ending in March fell by 11% to 2.98 billion rand ($151 million). As sales at Pep and Ackermans slowed, revenue increased, but inventory levels rose 12%, the business reported in a statement.

The stock experienced its largest intraday decline since September 13 as it dropped as much as 8.6% and was down 6.9% as of 11:50 a.m. in Johannesburg. With a 29% fall so far this year, it is now the worst performer among the eight stocks in the FTSE/JSE Retailers Index.

Content courtesy of Bloomberg & NFH