Pepkor warns of Covid hit on earnings


Pepkor warns of Covid hit on earnings

Published Date: 2020-10-16 | Source: Stephen Gunnion | Author: Stephen Gunnion

Pepkor warns of Covid hit on earnings

The retail group said it was impacted by lost sales, higher provisions and the likely impairment of goodwill and assets.

Pepkor will report a steep decline in full-year earnings after the Covid-19 lockdown resulted in lost sales and increased provisions for bad debt. It says the unprecedented circumstances and volatile trading environment continue to impact its forecasting ability.

In a trading statement, the retail group said earnings and headline earnings per share for the year to end-September would be at least 20% below those reported last year. It also attributed the decline to the likely impairment of goodwill and tangible assets as a result of Covid-19, as well as the implementation of new standards that impact how it accounts for leases on its properties.

Pepkor previously estimated that the lockdown cost it about R5 billion in sales after its stores weren't allowed to trade for the whole of April. However, the retailer said it achieved strong trade in May and June due to pent-up demand as restrictions were eased and it benefitted from social grant payments and its position in the value end of the market.

The group owns clothing chains Pep and Ackermans, as well as JD Group, Incredible Connection and Hi-Fi Corporation. In a trading statement in July, it said clothing and general merchandise sales were impacted marginally over the nine months to end-June, with furniture and electronics suffering larger declines in revenue. The Building Company was worst-hit, with a 17% fall in nine-month sales.

It said its liquidity benefited from strong trading since the relaxation of lockdown measures, pro-active expense management, conservative credit granting, better-than-expected credit book collections and the successful completion of an accelerated bookbuild which raised R1.9 billion. This allowed early settlement of a R1.5 billion loan which was due for repayment in August and early settlement of R4 billion of the total R6 billion in preference share funding due to mature in May 2022.

The retailer's shares rose 0.3% to R10.85 yesterday.

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