Mr Price’s share price we by more than 16 percent on the JSE after the group reported disappointing third-quarter results to end December 29, with the group blaming prevailing economic and retail environments in several markets in which the group operates.
The third quarter includes the busy Christmas and Black Friday periods in which most consumers flock to the shops to look for bargains.
“During the third quarter, September 30 to December 29 of the financial year ending March 30, retail sales and other income (RSOI) grew 3.5 percent to R7.1 billion. Total retail sales of R6.7bn, including franchise, were 2 percent higher,” the group said.
Mr Price’s share price closed a hefty 16.69 percent lower on the JSE yesterday at R215.90.
The group said the corporate store sales performance was below expectations.
“In our largest market, South Africa, the following factors have reduced consumer spending power which includes low gross domestic product growth, rising unemployment and inflation levels, a VAT rate increase, higher average fuel prices and an interest rate increase in November 2018,” the group said.
Mr Price also cited deterioration in South African consumer confidence in the third quarter.
“This was in contrast to the optimism experienced in December 2017 post the ANC election outcome and subsequent change in South Africa’s president, which provided temporary support to the retail sector,” the group said.
Despite the disappointing performance, the group performed slightly better in the nine months to end December, with group retail sales and other income increasing by 5.8 percent compared to last year.
During the quarter, South African retail sales were up by 1.1 percent to R6.2bn, while store sales were up 0.7 percent. The online sales were the shining light in the quarter, with its sales up 38.7 percent.
“The MRP Apparel online channel achieved sales growth of 35.4 percent, MRP Home 54.9 percent and MRP Sport 40.5 percent,” the group said.
The non-South African corporate-owned stores sales increased by 13.1 percent to R505.8 million.
Other income grew 35.3 percent to R411.1m, driven by an 85.9 percent increase in mobile and cellular. Interest and fees relating to the credit portfolio grew 7.7 percent, while insurance revenue declined 0.5 percent.
Its consumers continue to favour transacting in cash, with cash sales increasing 2.2 percent. Cash sales constituted 84.7 percent of sales and credit sales increased by 1.4 percent during the quarter.
The group expects the trading environment in the fourth quarter to remain very challenging.
“Improvements in the economy and consumer health are likely to be muted until the risk events settle and the general elections in South Africa take place in May 2019,” the group said.
Article sourced from IOL