![](https://blog.trive.co.za/wp-content/uploads/2024/01/inv-1024-x-512-px-2024-01-25T093445.881.png)
Pepkor Holdings Limited (JSE: PPH) has encountered challenges in the early weeks of 2024, witnessing a nearly 8% decline in its share price since the beginning of the year. The company’s financial performance took a turn last year, reporting a pretax loss of R108M for the year ending September 30, 2023— a notable shift from the R8.32Bn profit in the preceding year, primarily attributed to a R6.83Bn impairment charge on its accounts.
Compounding its difficulties, disruptions at South African ports have stranded approximately R700M worth of stock at sea, placing strain on its normal operational capabilities. Despite these setbacks, there are positive indicators. The company’s top line showed robust growth, advancing 7.7% to R87.41Bn. Additionally, Pepkor foresees relief from product inflation in the upcoming year, potentially enhancing customer affordability and contributing to sales growth.
In an intriguing development, Pepkor, South Africa’s largest clothing retailer, is contemplating a potential R2.4Bn takeover of Edgars. This strategic move could furnish the company with 131 additional stores, focusing on women’s clothing and cosmetics—areas ripe for Pepkor’s expansion efforts. As the company navigates these challenges and explores growth opportunities, the question arises: can Pepkor reverse its recent fortunes and set the stage for a strong start to the year?
Technical
On the daily chart, consolidation occurred between R18.21 and R19.75 before a recent breakdown sent the price looking for support at R17.54, the Fibonacci midpoint, which converged with the 100-SMA (orange line). However, a retracement has been initiated, and the price has cleared the R18.21 level to fall back into the prior range.
The bullish momentum now faces a hurdle at the 50-SMA (blue line) and 25-SMA (green line) near R18.84. Failure to clear these levels could signal that the bulls lack the traction to enforce meaningful upside. However, if the price breaks through, the resistance at R19.75 could come under pressure, with a potential leg up toward R20.02 and R20.49 becoming possible.
If the 50-SMA resistance triggers a pullback, another breakdown at R18.21 is possible, which could force the price to retest support at R17.54. An additional breakdown here could confirm a bearish run, bringing the demand zone at R16.95 into focus, which is also the 61.8% Fibonacci golden ratio.
![](https://blog.trive.co.za/wp-content/uploads/2024/01/image-110.png)
Summary
While Pepkor had a challenging start to the new year, its price looks to bounce back from a recent breakdown of the consolidation range. The 50-SMA near R18.84 could be worth looking out for, as a breakout could signal that the bulls are regaining the upper hand.
Sources: News24, Koyfin, Tradingview, Reuters, Pepkor Holdings Limited, Moneyweb
Piece written by Tiaan van Aswegen, Trive Financial Market Analyst
Disclaimer: Trive South Africa (Pty) Ltd (hereinafter referred to as “Trive SA”), with registration number 2005/011130/07, is an authorised Financial Services Provider in terms of the Financial Advisory and Intermediary Services Act, 37 of 2002. Trive SA is authorised and regulated by the South African Financial Sector Conduct Authority (FSCA) and holds FSP number 27231. Trive Financial Services Ltd (hereinafter referred to as “Trive MU”) holds an Investment Dealer (Full-Service Dealer, excluding Underwriting) Licence with licence number GB21026295 pursuant to section 29 of the Securities Act 2005, Rule 4 of the Securities Rules 2007, and the Financial Services Rules 2008. Trive MU is authorized and regulated by the Mauritius Financial Services Commission (FSC) and holds Global Business Licence number GB21026295 under Section 72(6) of the Financial Services Act. Trive SA and Trive MU are collectively known and referred to as “Trive Africa”.
Market and economic conditions are subject to sudden change which may have a material impact on the outcome of financial instruments and may not be suitable for all investors. Trive Africa and its employees assume no liability for any loss or damage (direct, indirect, consequential, or inconsequential) that may be suffered. Please consider the risks involved before you trade or invest. All trades on the Trive Africa platform are subject to the legal terms and conditions to which you agree to be bound. Brand Logos are owned by the respective companies and not by Trive Africa. The use of a company’s brand logo does not represent an endorsement of Trive Africa by the company, nor an endorsement of the company by Trive Africa, nor does it necessarily imply any contractual relationship. Images are for illustrative purposes only and past performance is not necessarily an indication of future performance. No services are offered to stateless persons, persons under the age of 18 years, persons and/or residents of sanctioned countries or any other jurisdiction where the distribution of leveraged instruments is prohibited, and citizens of any state or country where it may be against the law of that country to trade with a South African and/or Mauritius based company and/or where the services are not made available by Trive Africa to hold an account with us. In any case, above all, it is your responsibility to avoid contravening any legislation in the country from where you are at the time.
CFDs and other margin products are complex instruments and come with a high risk of losing money rapidly due to leverage. You should consider whether you understand how these products work and whether you can afford to take the high risk of losing your money. Professional clients can lose more than they deposit. See our full Risk Disclosure and Terms of Business for further details. Some or all of the services and products are not offered to citizens or residents of certain jurisdictions where international sanctions or local regulatory requirements restrict or prohibit them.