Mr Price reveals the impact of lockdown on sales – as it looks to micro, small and medium store formats post Covid-19

Budget retailer Mr Price has revealed how the impact of lockdown in South Africa impacted its business.

In the month of April 2020, all the group’s South African stores were closed, with retail sales down 89.1% off a base of R1.9 billion in April  2019.

Following the relaxation of lockdown restrictions to level 4 from 1  May 2020, high levels of pent up consumer demand were experienced, it said.

Retail sales for the period 1 May 2020 – 20 June 2020 were up 12.0% (Mr Price Apparel, +16.1%, Mr Price Sport, +7.7%, Miladys, -13.8%, Mr Price Home, +1.3% and Sheet Street, +15.2%).

Pent up demand for apparel in May shifted to homewares in June, as lockdown restrictions on merchandise permitted to be sold were fully lifted, the retailer said.

Consumers continue to favour transacting in cash. In May and June  combined, cash sales increased 16.7% while credit sales declined 9.4%. The group said it anticipates that the credit landscape will deteriorate further positioning it well to capture market share.

“Various factors over this period have led to unusually high levels of consumer demand: the need for winter & kids’ merchandise, increased SASSA grant payments, debt payment holidays, TERS claims and constrained spending under restriction level 4 and 5,” Mr Price said.

Online sales grew strongly and were up 90.1% over the period, it said. “It is still to be seen whether this is a permanent step change in consumer behaviour,” the group said.

“In addition to the changing online consumer behaviour, a shift in store location has been notable. Super regional centres lagged smaller formats due to reduced trading hours and customers preferring to shop at more convenient locations.

“The combination of strong online sales and store locations which support customer’s needs positions the group well as a leading omni-channel retailer in this changing landscape.”

Looking ahead, Mr Price said it is not possible at this stage to quantify the economic impact on the group, “but ongoing operational disruptions and future uncertainty remain significant challenges”.

On Thursday, the group reported a 2.1% rise in total revenue from continuing operations for the 52 weeks ended March 28, to R23 billion with retail sales increasing by 1.5% (comparable stores -1.4%) to R21.2 billion.

Headline earnings per share (HEPS) declined 10.4% to 1,047 cents per share and diluted HEPS decreased 9.9% to 1,029 cents per share.

Excluding the additional Covid-19 provisions, adjusted normalised diluted headline earnings per share  decreased by 4.6% to 1 089.3 cents.

Cash sales including cellular grew by 2.4% and constitute 84.3% of total sales. Annual retail sales excluding the last two weeks of March 2020 grew 2.7%, it said.

No final dividend has been declared in order to preserve cash considering the uncertainty and future potential disruption, resulting in a decrease in annual dividends of 57.7%, Mr Price said.

Mr Price said it continues to grow its footprint and opened 71 new stores and expanded 16 over the past year. After closing 16 stores and reducing the size of 28, total weighted average space was up 2.2%, taking total corporate owned stores to 1,378.

New store capex was allocated mainly to micro, small and medium formats aiding group store growth of 4.2%. “This  supports the group’s high trading densities and positions its store network favourably post Covid-19,” it said.

On 20 May 2020 the group announced its intent to affect a capital raise of up to 10% of the company’s ordinary issued shares, at an appropriate point in time and as market conditions permit.

“The board and management are of the view that anticipated market conditions will allow strong companies to capitalise on growth opportunities whilst maintaining financial flexibility,” it said.

 

 


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Mr Price reveals the impact of lockdown on sales – as it looks to micro, small and medium store formats post Covid-19