Mr Price shares drop 6.5%

Mr Price on Friday experienced a 6.5% drop in its share price after the clothing and homeware retailer said it expects lower first-half profit margins due to stock write-offs and higherthan-average price markdowns.

Mr Price experienced on Friday the biggest one-day drop in its share price since October 2020 after the clothing and homeware retailer said it expects lower first-half profit margins due to stock write-offs and higherthan-average price markdowns.

The share fell 6.5% to R219.35 on the JSE, valuing the group at R56.14bn.

The company, which sells clothing and homeware to predominantly low- to middleincome consumers, attributed inventory write-off to civil unrest that swept through parts of KwaZulu-Natal and Gauteng.

Greg Katzenellenbogen, portfolio manager at Sanlam Private Wealth, said the market overreacted by focusing on the effects of the riots and the supply chain issues, but there were “a number of positives” such as growing market share and “excellent growth in sales.

“These will be temporary. Its performance, given SA’s economic woes, was good and will recover from the short-term issues. The focus is on cash sales so [it] should weather a slowdown better than most.”

Despite the 7% drop, the share price is still up 28% so far in 2021 and 77% year on year, according to Infront data.

Mr Price said its retail sales and other income surged 51% in the 18 weeks ended August 7, compared with the same period a year ago.

The 51% sales growth came off a low base in 2020, which was marred by the first hard lockdown, which banned the sale of nonessential items. The acquisition of Power Fashion and Yuppiechef also boosted sales, though to a lesser degree.

Compared with 2019, before the Covid-19 pandemic, sales grew 17% year on year.

Mr Price said its largest apparel division gained market share for 15 straight months, “highlighting its strong customer value proposition”.

CASH SALES

Consumers chose to buy mostly in cash, with cash sales rising 40% and constituting 85% of total sales, while credit sales approached pre-Covid levels, the company said.

Clothing retailers continue to feel the pinch of the pandemic through the reduction in consumer discretionary spending and as consumers avoid crowded spaces such as malls for fear of contracting the virus.

Online sales shot up 46.4% during the period under review, but made up just 2.9% of total sales in another sign that e-commerce has yet to reach critical mass in SA.

Mr Price expanded its store base by 211, boosted mainly by Power Fashion and Yuppiechef.

The retailer said it was counting the cost after 111 of its stores were looted and vandalised in early July during the unrest, but added that they all had insurance cover. About 75% of the affected stores will reopen by the end of September and another 10% by the end of the financial year.

Mr Price said it is feeling the effect of the global supply disruption caused by the pandemic, in line with the rest of the sector.