Intense load shedding hammers Mr Price’s backup plans

South African retailer Mr Price is rolling out backup power to all its stores, as the company’s chairman called the country’s current electricity shortage untenable.

The Durban-based specialist in mid-range apparel, sports goods and homeware said on Friday it is on track to reach its target of backup power in 70% of its South African stores by the end of this financial year in March, and in 100% of shops “as soon as possible thereafter.”

While this is adequate for a certain threshold of blackouts, the plans are under review due to the recent intensity levels, Mr Price said in a trading update.

“It is critical for government to communicate its official and detailed plan for the solution to the energy crisis in South Africa, in order to protect and grow the economy and for business to plan accordingly,” said Chairman Nigel Payne. “

The current situation is untenable, and government needs to take decisive action and to be held accountable for implementation.”

Power utility Eskom has rationed electricity for 82 consecutive days, with up to 12 hours of daily blackouts last week and earlier this week.

President Cyril Ramaphosa cancelled his attendance at this year’s World Economic Forum to deal with the crisis and had emergency meetings with Eskom officials, but the government and the power company have not officially communicated what they plan to do.

Mr Price said that load shedding escalated significantly throughout its reporting period and presented the group with a major challenge in the last quarter, especially as peak trading periods were affected.

“According to the national electricity provider Eskom, December 2022 – the group’s single largest trading month – experienced the highest recorded monthly load reduction of electricity supply, which caused a significant loss in trading hours in the retail sector and inhibited sales growth,” it said.

Notably, the impact of load shedding was seen in the significant variances in sales growth between stores that have backup power and those that do not.

“The group has taken urgent steps to limit the effect of load shedding, albeit at considerable cost.”

Mr Price said that load shedding levels are anticipated to worsen in Q4 FY2023, which will continue to burden the business’ effectiveness.

“The challenging consumer environment is expected to continue into FY2024. The group’s diversified retail portfolio together with its everyday low-price positioning, will be key in signalling value to constrained customers and defending market share.”

The group noted that rising inflation and interest rates and negative real wage growth resulted in continued financial constraints for consumers.

With Bloomberg

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