Mr Price tumbles more than 8%

• Retailer misses internal sales expectations in half-year as group revenue increases 6.5%

Mr Price’s shares slumped the most since the early stages of the pandemic on Thursday after the retailer released half-year results, noting that it had missed internal sales expectations. Its home division, which includes Yuppie Chef, reported that like-for-like sales were down almost 10%.

Mr Price’s shares slumped the most since the early stages of the pandemic after the retailer released its half-year results to end-September, noting that it had missed internal sales expectations.

After losing as much as 8.6% in intraday trade, the share closed 8.14% lower at R170.55.

Its home division, which includes Yuppie Chef, Mr Price Home and Sheet Street, reported that like-for-like sales were down almost 10%. Overall, home sales fell 1.6%. Homeware sales in the previous half year were off a higher base as consumers had invested in their houses during the pandemic.

The group put some blame on its one-off merchandising software rollout, which also delayed orders and “materially impacted retail sales in April and May”, leading to higher numbers of marked down goods.

CFO Mark Stirton said a lot of the extra stock from that period was seasonal, making it easier to sell.

The group, which is based in SA (93%) and Africa (7%), is also dealing with cash-strapped local consumers, raising questions over whether it can grow revenue in the next financial year.

CEO Mark Blair began his presentation by highlighting the almost 40% increase in fuel prices, rising interest rates and double-digit food inflation.

Customers are likely to spend less on clothing and more on food in future, with fashion retailers also expecting to face increasing competition.

Mr Price has not suffered losses abroad like Woolworths and Truworths, but Sasfin analyst Alec Abraham said: “I think Mr Price are painting themselves into a corner by limiting themselves to SA. The consumer pie is not growing and the outlook for growth is limited.”

However, plans to grow include an investment committee to “vet opportunities”, he said.

The company plans to open 12 new stand-alone baby clothes stores while also focusing on adding soft furnishings to Yuppie Chef stores, with the first of this new concept having opened in Menlyn Mall in Pretoria.

Clicks, Dis-Chem and Checkers have all added a focus on baby goods to grow traditional sales in a weakening economy. Mr Price’s purchase of sneaker chain Studio 88 for R3.3bn will provide a boost when those sales are added to its revenue from October.

The retailer said on Thursday that group revenue increased 6.5% to R13.3bn and retail sales 6% to R12.59bn. Retail selling price inflation was 3.8%, well below consumer inflation.

Mr Price benefited from its 2020 purchase of discount retailer Power Fashion, which grew sales almost 22% in the period. It is not clear how much Power Fashion’s success is boosting the group’s overall clothing sales figures that include Milady’s and Mr Price.

Abraham said when looking at the volume declines in the home segments: “One would be forgiven in thinking that the group may no longer be growing. Maybe that’s why the share is down today.”

Mr Price’s competitors are also seeing a slowdown, with Pep and Ackermans’ sale growth in its latest financial year below in-store price inflation.

Mr Price reported an increased demand for credit. “Applications for new accounts were up 45.5%, indicating increased pressure on household disposable income,” it said.

Despite this push, it reduced its credit approval rate by 640 basis points (bps) to about 27%, adding that it “has no appetite to push the credit channel outside its long-established low-risk tolerance”.

The retailer does, however, sell goods on lay-bye to customers who are declined credit, which allows them to pay for their purchases before collecting them.

The company declared an interim dividend of 312.5c per share, a 10.6% increase.

Diluted headline earnings per share (Heps), a profit measure that strips out impairments and one-off items, rose by 10% to 486.1c.

Capital expenditure on expansion is forecast to be about R1.3bn for the 2023 financial year as the group plans to open 230-250 new outlets including Studio 88 stores.

The company said 56% of its trading days were affected by load-shedding during the interim period, with more than 80,000 trading hours estimated to have been lost.

I THINK MR PRICE ARE PAINTING THEMSELVES INTO A CORNER BY LIMITING THEMSELVES TO SA. THE CONSUMER PIE IS NOT GROWING