Pep parent powers on, despite Steinhoff scandals

Johannesburg - The quarterly revenue of Steinhoff Africa Retail (STAR) increased by 15.5% to R18.4bn on the back of a strong performance by its discount clothing stores. 

During the three months ended December 31 2017, STAR managed to shake the Steinhoff yoke, showing strong results in a still constrained retail space. The retail group said in its trading update that on a comparable basis, revenue growth amounted to 8.5% for the quarter.

While its parent company Steinhoff International has not recovered after losing 90% of its value after its December meltdown, statistics showed that STAR had recovered 23.5% since January as investors’ fears about its involvement were laid to rest. It also overcame lacklustre Christmas sales, with a back-to-school recovery. 

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STAR, which was established following a decision to separate Steinhoff’s emerging and developed market retail businesses, listed on the JSE in September 2017 at an opening price of at R21.75. The group, which describes itself as a retailer servicing the value-conscious consumer in sub-Saharan Africa, owns retail brands Pep, Ackermans, Tekki Town, Hifi Corporation, BUCO and Russels among others.

It has been mostly its flagship cash cows Pep and Ackermans that have powered its strong results this past quarter. The brands on aggregate reported 6.3% revenue growth and 1.9% like-for-like sales growth for the quarter.

STAR reiterated the message in its annual results presentation in December 2017, where it stated that its  performance was affected by deflation as a result of the strengthened rand.

• READ: Pep, Ackermans drive Steinhoff Africa's star results

Growth in sales units of 9.8% or 6.2% on a like-for-like basis, supported performance as lower prices were passed on to customers.

It said that its December resilient back-to-school campaigns resulted in like-for-like sales growth of 4.9% during the month of January 2018.

STAR’s furniture, consumer electronics and appliances brands increased market share and reported strong revenue growth of 12.1% and like-for-like sales growth of 7.4% during the quarter.

But its building materials and DIY business continued to operate in a challenging market, with the first quarter revenue declining by 5.1%.

Its specialty fashion and footwear businesses, which focus on the adult apparel market, had a successful quarter, reporting revenue growth of 19.9% and like-for-like sales growth of 12.5%.

“This performance was supported by strong growth achieved by Tekkie Town and the repositioned retail brands,” STAR stated.

Deflation remained a challenge to watch, STAR cautioned, especially on the performance of Pep and Ackermans. But management said it remained confident that the more affordable offer and lower prices within these brands will continue to resonate with a cash-strapped consumer.

The building materials market is expected to remain subdued, but the positive momentum in the remainder of the STAR group is expected to further drive performance in the 2018 financial year.