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HomeBusinessMarket ‘disappointed’ in Mr Price’s interims

Market ‘disappointed’ in Mr Price’s interims

Market ‘disappointed’ in Mr Price’s interims

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Mr Price’s shares dropped by almost 8% yesterday after the retailer reported that its revenue growth was knocked by load shedding, inconsistencies in social grants and the replacement of its Merchandise Enterprise Resource Planning system.

In its results for the 26 weeks ended October 1, 2022, released yesterday, revenue was up 6.5% to R13.3 billion.

The retailer said electricity load shedding caused 56% of trading days to be interrupted during the reporting period and estimates that more than 80 000 trading hours were lost.

Retail sales grew 6% to R12.6 billion. Group store sales were up 5.8% and online sales increased by 11.2%.

Mr Price also said the inconsistent and non-payment of social grants during the period affected its trading.

“The replacement of the group’s Merchandise Enterprise Resource Planning system on April 2, 2022, disrupted supply chain and merchant activities, and materially impacted retail sales in April and May,” it said.

Sales for these two months combined, which make up about 40% of retail sales for the first half of the year, grew by 3.1%, while June to August sales performance improved, rising by 12.9%.

“September was a poor trading month for the market as a whole as severe load shedding was implemented, 44.1% of trading hours lost in the first half were in September alone, and sales declined 6.7%,” the group said.

Mr Price CEO Mark Blair said: “The top-line performance did not meet our internal targets, but our market-leading retail performance post-Covid-19, with sales growth of 37.8% in the base, in which we gained further market share, was always going to present a challenge.

“I take comfort that the system’s impact, in particular, is once-off, and we have achieved a significant milestone in our Retail Modernisation Programme aimed at de-risking our IT environment and establishing an infrastructure to support our ambitions.”

Blair said the good news was that by year-end, Mr Price would have some power backup in 70% of its stores.

“This would be a big jump from where we were in September,” he said.

The group increased its basic earnings per share by 13.7% to 500.1c, headline earnings per share (Heps) grew by 10.6% to 496c, while diluted headline earnings per share increased by 10.8% to 486.1c.

A dividend of 312.5c per share was declared, a 10.6% increase over the prior year.

The apparel segment’s operating profit increased by 22.8%, while the homeware segment grew by 46.6%.

“The homeware segment has seen aggressive competitor activity over the last 12 months which has negatively impacted its market share, which remains dominant,” Mr Price said.

Looking forward, Mr Price said adverse global economic factors would continue to cast uncertainty on the balance of this financial year. The impact of inflation, in conjunction with rising interest rates, made it a challenging trading environment.

“I think second half is going to be tough. For me, the outlook is really around consumer financial and competitor dynamics. I think it’s going to be a tough six months beyond that too,” Blair said.

Anchor Capital equity analyst Zinhle Mayekiso said Mr Price’s interim results for the first half of 2023 disappointed the market, with Mr Price seeing a negative share price reaction on the day of release.

“Top-line growth trends for Mr Price were very weak relative to market expectations, and the challenging second-half outlook heightened the market’s cautious stance on the counter. Despite weak top-line growth, tight cost control helped operating margins to improve to 14.7%, and Heps ultimately increased by 10.6% year-on-year.”

The shares dropped by 7.59% in intraday trade and traded at R171.57. They have declined by 6.29% in the past six months.

BUSINESS REPORT

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