Pep could be the answer for posting parcels

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Pepkor could become a more successful version of the SA Post Office delivering on average 11,500 parcels a day.

JSE-listed Pepkor’s parcel delivery arm, Paxi, delivered 4.2 million parcels during the year up to the end of September, with an average delivery of 11,500 parcels a day — and almost 21,500 parcels on its busiest day.

Chief operations officer Sean Cardinaal says Paxi is technically a tech product — “a cheap courier service that uses a combination of our extensive store network and our extensive distribution capability”. 

The Paxi division has become a very valuable proposition for the group, with 2.8 million unique senders, of which 24,000 are small businesses. 

“In fact, 10% of the parcels sent through Paxi were sent by small businesses. Paxi is currently available in 2,800 stores, but we have more than 5,800 stores in our network, so the opportunity to grow this offering across our entire network is an opportunity we will be looking at,” he says. 

Pepkor, which is home to popular brands including Pep, Ackermans, Tekkie Town, The Building Company and Incredible, reported strong headline earnings growth of 20.1% for the year to end September, reflecting a consistent performance. 

Stripping out the noise of the past three years, the group grew like-for-like sales by 4.2% on an annual basis.

Chief executive Pieter Erasmus says while customers have continued to face an increasingly inflationary environment, Pepkor has focused on leveraging its expansive physical capabilities to offer products and services at the lowest possible price. 

“This has translated into 1.9 billion transactions across our more than 5,800 stores and 202,000 Flash traders. The group sold 12 million cellphones this year, which equates to seven out of every 10 cell phones sold in the country,” he says.

Revenue grew 5.3% to R81.4-billion, but was negatively impacted by the flooding of the PEP distribution centre in April 2022. This was further exacerbated by stores that had been unable to trade as a result of the social unrest of July 2021.

A total of 122 stores were ready for reopening only during the course of this year, resulting in lost sales. Another 37 are currently unable to trade due to circumstances outside of the group’s control. Taking these three factors into account, revenue growth in normalised terms would have been just over 8%.

Rolling blackouts increased to unprecedented levels, especially during the last quarter. During the first half of 2022, rolling blackouts increased by 80% compared with the prior year. Following this, rolling blackouts increased to Level 6. As a result, the group reported 313,000 lost trading hours during the year, reflecting an increase of 123% compared with the previous year.

Erasmus pointed out that while 70% of the group’s stores have backup power sources to support trading during power interruptions, the negative impact of rolling blackouts on consumer behaviour was far-reaching, with fewer customers visiting stores.

A key indicator of Pepkor’s defensive business model is that it is highly cash generative with 92% of sales handled in cash, generating R11.2-billion.  

Within traditional retail, the clothing and general merchandise segment remains the largest contributor to group revenue (66%) and operating profit (82%).

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