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Mon 29 Sep 2003, 12:54 Pep springs back with star results
Pep springs back with star results  
September 29, 2003

By Vera von Lieres

Cape Town - Pep, the wholly owned subsidiary of mass market clothing retailer Pepkor, has successfully turned around after facing a bleak future about five years ago.

The cash-based value retailer, the biggest profit contributor historically within Pepkor, had one of its best years in its annual results to June.

Together with its sister brand Ackermans, it was the star performer of the group.

Another value clothing retailer that competes in the same market is Mr Price, although not all of Mr Price's chains are cash geared.

Managing director André Labuschaigne said on Friday that the group had emerged from a tough period around 1998/99 to a position where it had posted the highest like-for-like sales - a key financial indicator in retailing - among clothing retailers over the last four years. 

Pep was also among those retailers that had recorded the highest growth in operating profit in the clothing retail industry over the last four years.

Labuschaigne - who took over as managing director in 1998 without any previous retail experience and coming from an accounting background - put in place a bold turnaround strategy which involved giving the go-ahead to an inexperienced team of buyers to buy the products they believed in and form strong relationships with key suppliers.

Pep also put in place a comprehensive basic merchandising system. 

Other changes involved creating new store images, offloading old stock, closing unprofitable stores and finding better store locations.   


Integral to Pep's turnaround and the new culture at the group was getting staff involved, Labuschaigne emphasised. 

"The view of the leadership team was that everyone in the company should be empowered to make a meaningful difference within their spheres of responsibility." 

Being a value retailer based on the concept of "If you want to sell cheaply, you must operate cheaply" brought with it particular challenges.

"Financial controls and business acumen among the broader leadership team have ensured a conservative approach to dealing with hard-earned money," Labuschaigne noted.

He said Pep, which has a wide national distribution network and operates 1 100 stores in eight countries, was set up to provide affordable clothing for all South Africans.

"Today we can still claim that we sell our merchandise at the lowest prices of any retailer in the country," he said. 

"We don't sell cheap clothing; we sell clothing cheaply."

The focus ahead would include a R160 million store expansion programme, some investment in systems and the ongoing emphasis placed on empowering staff. 

In the financial year to June Pep reported record results, with operating profit after foreign exchange losses up by 37 percent.

Holding company Pepkor's share price upped 4c to end at R7.74 on Friday.
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