* Full-year earnings down 34.4%
* Plans to exit Uganda by December
* Debt reduced by 6.9 bln rand (Recasts, adds CEO comment)
By Nqobile Dludla
JOHANNESBURG, Nov 23 (Reuters) – South African retailer Pepkor Holdings is hopeful of a quick recovery in profitability, its CEO said on Monday, citing a rise in market share driven by price-conscious shoppers even as the coronovirus crisis sent annual profit down 34%.
The budget clothing and furniture retailer’s stores were barred from trading during an initial five-week lockdown early this year, resulting in about 5 billion rand ($325.2 million) in lost sales, with the group unable to sell its full range of merchandise range until June.
However, increased social grant payments that helped shoppers to satisfy their pent-up demand when stores reopened in May served to offset a sales slump in the third quarter of its financial year to Sept.30.
This lifted overall annual sales by 3.6% to 63.7 billion rand ($4.15 billion), with the company reporting continuing sales momentum since the end of its financial year.
Consumer focus on less discretionary and more affordable products resulted in “substantial” market share gains in clothing, footwear, homeware and cellular, said group CEO Leon Lourens.
However, full-year headline earnings per share (HEPS)- the main profit measure in South Africa – from continuing operations fell 34.4% to 62.6 cents and Pepkor swung to a 3 billion rand loss from a profit of 2.1 billion rand after writing down the value of its businesses by 4.8 billion rand.
Lourens told investors he was “very confident and bullish” that the group can get to at least 2019 profitability levels “quite soon”.
“It’s the first year in many that we haven’t been able to grow our profits and that is something we want to set right as soon as possible. Hopefully, with a bit of luck, this year we’ll be able to do.”
Pepkor said it reduced net debt by 6.9 billion rand to 7.1 billion rand, thanks to strong cash generation, good credit book collections and a 1.9 billion rand share sale.
The retailer, majority owned by Steinhoff, also said that expansion into East Africa is no longer feasible and it will close its 13 stores in Uganda by the end of December.
Hurt by the devaluation of currencies in countries such as Angola, Zambia and Zimbabwe, Pepkor said it is not opening any new stores outside of South Africa or allocating more capital as part of consolidation plans until market conditions turn favourable. ($1 = 15.3324 rand)
(Reporting by Nqobile Dludla Editing by Emelia Sithole-Matarise and David Goodman)