Pepkor's profits grow after driving value for customers in the tough economic environment

Pepkor Holdings has announced significant profit growth for the year to September 30, driven by market share gains in retail and a burgeoning fintech segment.

The company reported a 12% increase in revenue, reaching R95.3 billion, and an operating profit rise of 13.2% to R11.1bn. In a show of confidence, Pepkor has raised its dividend by 9.2%, now standing at 53 cents per share, alongside a remarkable 23.4% growth in normalised headline earnings per share (HEPS), which has reached 161 cents.

CEO Pieter Erasmus said the results were a testament to Pepkor's ability to generate sustainable value, despite a dynamic economic landscape. In a statement, he noted the company's commitment to addressing customer needs and enhancing affordability and accessibility, saying, “We continue to build a unique position of trust among millions of our customers.” The CEO highlighted the core retail business's market share gains, along with the strategic focus on digital inclusion and fintech which are now yielding fruitful results.

Pepkor’s gross profit margin has expanded by 150 basis points to 39.8%, while cash generated from operations remained robust at R10.9bn.

The retail divisions showcased strong market share growth across key categories. Group merchandise sales increased by 8.8%, which included a 6.5% growth in like-for-like sales. Additionally, the group’s store network has seen an expansion of 4.1%, surpassing the significant milestone of 6 000 stores.

The retail trading environment in South Africa benefited from the introduction of the two-pot retirement system in the first half of the financial year. Enhanced product availability and improved pricing strategies further supported Pepkor’s impressive performance.

Among the standout performers was Pepkor’s fintech segment, which reported a 31.1% increase in revenue to R16.6bn, with operating profit soaring by 52.3% to R2.2bn. The informal market platform, Flash, saw throughput jump by 23% to R60bn, with 170 000 active traders driving financial inclusion and increasing tapped value by 37.6% to R21bn.

PEP, the group flagship brand, delivered sales growth of 10.8% (a 9.3% increase on a like-for-like basis) and opened 95 new stores, further capturing market share across categories, including Babies, Kids, School, Adult, and Home segments. PEP Home expanded its footprint with the launch of 45 new stores.

Ackermans, another key brand, grew sales by 7.2%, supported by a clean stock position. The brand also saw market share gains in the Kids category in the fourth quarter and plans to expand into menswear, with aspirations to launch a beauty range in the 2026 financial year.

In the Specialty division, which includes Tekkie Town and Refinery, sales grew by 8.3%. Tekkie Town rebounded strongly in the second half, while the newly launched adult womenswear line, Ayana, was successfully introduced to 32 stores. The acquisition of Choice Clothing in June marked an entry into the off-price retail market, which has performed well thus far.

The Lifestyle division, encompassing brands like Rochester, Bradlows, and Incredible Connection, recorded a 7.2% sales increase, with online sales surging by 15%. Pepkor also launched the Skooch courier service, aimed at improving logistics and efficiency in parcel distribution.

Pepkor sold a remarkable 13.5 million handsets, accounting for eight out of ten prepaid handsets sold in South Africa. The company's cellular handset rental product, FoneYam, surpassed 2 million active users, effectively lowering affordability barriers to smartphone access.

The acquisition of the Shoprite furniture business and the newly added stores from Legit, Swagga, and Style had bolstered Pepkor’s footprint in the adultwear market. Pepkor received approval to establish a banking presence in South Africa and acquired fintech software platform Cloudbadger, aiming for further advancements in digital finance.

Erasmus acknowledged that while challenges persisted, Pepkor's growth trajectory remained strong. A view toward the upcoming year includes integrating recent acquisitions, consolidating new retail formats, and enhancing digital and omnichannel capabilities, with plans to open between 250 and 300 new stores in the 2026 financial year