Categories: Business NewsNews
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2023-12-08 9:02 AM

Pepkor Explores Major South African Expansion with Edgars

  • Strategic Expansion Move: Pepkor, Africa's largest clothing retailer, is considering a substantial acquisition of the South African brand Edgars. This move aligns with Pepkor's strategic plans to broaden its market presence, particularly in women’s apparel and cosmetics segments.
  • Competitive Retail Landscape: The potential acquisition occurs amidst increased competition in South Africa's affordable clothing segment. The successful turnaround of Jet by The Foschini Group intensifies competition, prompting Pepkor's interest in reinforcing its market position through acquisitions.
  • Challenges and Growth Strategies: Despite facing challenges, such as a decline in shares due to fashion choices at its flagship Ackermans unit, Pepkor remains committed to growth. The company plans to leverage acquisitions and expansion into Brazil to bolster its presence, alongside focusing on adult wear to tap into untapped market potential.
By Miriam Matoma

In a strategic move to expand its footprint in South Africa, Pepkor, the continent’s largest clothing retailer, is contemplating a significant takeover of its South African competitor, Edgars. Sources familiar with the matter revealed that discussions are underway regarding a potential acquisition valued at up to R2.4 billion.

The iconic 94-year-old Edgars brand, which was rescued from insolvency three years ago by the retail holding company Retailability, has emerged as a prime target for Pepkor’s expansion strategy. However, insiders caution that while talks are progressing, the deal is not yet sealed, leaving room for other potential suitors to enter the fray.

Pepkor, renowned for its chains like Pep, Ackermans, and Tekkie Town, aims to broaden its market presence, particularly in women’s apparel and cosmetics — areas of keen interest for the retailer. The acquisition of Edgars, boasting 131 stores, aligns with Pepkor’s ambitious expansion plans and strategic focus on enhancing its offerings in these lucrative segments.

Pieter Erasmus, CEO of Pepkor, emphasized the company’s commitment to organic growth but also hinted at leveraging acquisitions to bolster its presence in the adult clothing market. He iterated, “Our biggest opportunity lies in adult wear, where our market share is notably low.”

Despite queries, Pepkor refrained from commenting on the potential purchase of Edgars. Norman Drieselmann, CEO of Retailability, stated, “While private equity remains open to opportunities, there are no ongoing discussions regarding the sale of Retailability or Edgars at present.”

This prospective acquisition comes amidst The Foschini Group’s successful turnaround of Jet, intensifying competition in the affordable clothing segment. TFG acquired Jet from the administrators overseeing the restructuring of Edcon Holdings Ltd., the former parent company of both Jet and Edgars.

Following its acquisition by Retailability, Edgars underwent a revamp, shedding non-performing store spaces and renegotiating favorable rental terms. With support from Johannesburg-based private equity firm Metier, Retailability also manages brands like Legit, Beaver Canoe, and Boardmans.

Highlighting Edgars’ ongoing transformation, Drieselmann mentioned, “Our department stores are in the final phase of the recovery program.”

In parallel to its South African ventures, Pepkor is expanding its presence in Brazil. Acquiring Grupo Avenida SA marked its foray into South America, and the company is ramping up investments in the region. Erasmus outlined plans to accelerate Avenida store openings to 50 per year, doubling the initial projection.

Despite Pepkor’s notable market presence, its shares have encountered a 5.1% decline this year. Challenges arose, particularly with fashion selections at its flagship Ackermans unit, leading to Pepkor’s status as the weakest performer among clothing retailers on the FTSE/JSE Retailers Index.

As Pepkor strategically navigates potential acquisitions and focuses on market expansion both domestically and abroad, its moves in the South African retail landscape continue to draw considerable attention and interest.

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Miriam Matoma

Miriam is a freelance writer, she covers economics and government news for Rateweb. You can contact her on: Email: Twitter: @MatomaMiriam

Tags: Pepkor