Fashion retailer Mr Price on Thursday (26 November) published its interim results for the 26 weeks ended 26 September 2020, a period in which the group absorbed the full impact of the Covid-19 pandemic.
Headline earnings per share (HEPS) decreased by 24.8% to 333.5 cents and diluted headline earnings per share decreased by 24.6% to 328.5 cents, the group said.
Total revenue from continuing operations decreased 14.4% to R9.2 billion with retail sales declining 14.8% to R8.6 billion. Despite this, the group said it grew market share by 100 basis points over the period and excluding April 2020, retail sales grew 3.2% (RSA up 3.7%).
Online sales grew 71.5% from May 2020, accounting for 2.5% of sales, the group said.
Other income decreased 13.6% to R433 million, impacted negatively by the weak credit environment and repo rate cuts of 300bps this year.
Mr Price said it will resume dividend payments at a 63.0% pay-out ratio, accordingly an interim dividend of 210.1 cents has been declared.
“The credit environment remains under pressure. TransUnion’s Consumer Credit Index reported deteriorating consumer credit health again in Q2 2020. The National Credit Regulator (NCR) report noted a spike in account arrears as well as the rejection rates on new accounts reaching an all-time high,” Mr Price said.
The group said it received 27.3% fewer account applications over the period and the approval rate decreased by 310bps to 30.1%.
During the post lockdown period, Mr Price said it has capitalised on several trends:
- Consumers’ appetite for credit is low, preferring to transact in cash. This has favoured the group’s cash-based model, with cash sales growth of 6.4%, accounting for 85.5% of total sales. Credit sales decreased by 12.1%.
- Consumers still prefer to shop convenient locations compared to large shopping centres – although foot traffic has subsequently increased. “The group’s diverse store footprint has been a competitive advantage and its micro, small and medium stores continue to perform strongly,” it said.
- Due to less frequent visits to physical stores, consumer transactions have declined but basket spend per transaction has increased by double digit levels.
- Online sales grew 71.5% (PY 19.4%) and accounts for 2.5% (PY 1.5%) of the group’s sales. Website traffic (web and app) increased 78.6% with the group holding the second highest share of traffic among its omni-channel competitors, according to Similarweb.
- Mr Price Apparel outperformed the market, gaining market share every month since March 2020. Miladys has experienced headwinds due to its higher proportion of credit customers and its conservative customer base which has avoided shopping centre risks. Mr Price Sport initially benefited from a surge in demand for fitness apparel and equipment, but growth has subsequently been impeded by lower demand for seasonal sports merchandise as well as gym and school closures.
- The Home segment has grown by double digits as consumers have spent more time at home, either making improvements to their living environments or setting up home offices. Collectively the group’s homeware divisions hold a high percentage of market share in South Africa and have continued to gain off this base, increasing share every month since June 2020, when homeware restrictions ended.
- Telecoms revenue also grew at double digit levels, driven by cellular handsets and accessories sold through 303 locations across the group. The Cellular division grew market share according to GFK.
Looking ahead, Mr Price stressed that the threat of the pandemic is by no means over and uncertainty regarding stricter lockdown levels remains.
“The group’s sales grew by double digits in the first six weeks of H2 FY21. However, sales growth was flat in the week prior to Black Friday week, indicating the extreme volatility in consumer purchasing behaviour.
“The group is expecting a challenging Black Friday week, due partly to Covid-19 store restrictions which will limit footfall in stores, as well as to the strong performance in the prior year,” it said.
“The group does however anticipate continued high online growth as customers switch channels.”