Mr Price closes the taps
Mr Price is maintaining caution when extending credit to consumers amidst the challenging economic environment.
In its interim results for the 26 weeks ended 28 September 2024, Mr Price increased its total revenue by 5.2% to R12.6 billion.
Basic and headline earnings per share of 481.5 cents and 481.8 cents increased by 7.3% and 7.1% respectively. Diluted headline earnings per share grew 6.5% to 468.0 cents.
The group also declared an interim dividend of 303.6 cents per share, up 7.1%.
“While there were macroeconomic positives of no load shedding, increased political stability and the appreciation of the Rand, the earnings performance during the period is reflective of the continued constraint on consumer affordability levels,” said the group.
“Negative real wage growth and low disposable income growth remained weighed down by the effects of previously prolonged periods of high inflation, elevated interest rates and high consumer debt servicing.”
That said, the group gained market share in five out of the six months, only losing market share in the highly promotional month of July as its competitor winter merchandise was discounted.
“The financial year started with a very challenging first quarter, impacted by a contraction in the economy caused by uncertainty before the national elections and the late onset of winter,” said CEO Mark Blair.
“We are very satisfied with our overall market share performance which was supported by higher gross margins in all three trading segments.”
“The increasing sales momentum in the second quarter and the strong start in the second half with sales up 12.4% in the first 7 weeks is encouraging and hopefully early signs that South Africa is entering an upward economic cycle.”
Group retail sales for the period increasd by 5.1% to R16.9 billion, while other income of R636m was up 4.8% and finance income of R91m increased 59.4% as the group’s cash balance of R2.2bn continues to build post the Studio 88 acquisition.
Cash sales constituted 88.1% of group retail sales and increased 5.1%.
Although the Transunion Consumer Credit Index is showing early signs of recovery, the group’s credit sales growth of 2.7% highlights an ongoing caution in extending new credit accounts in the current environment.
“Demand for credit from consumers remained high as new account applications increased 32.6%, however, the approval rate of 19.0% was appropriate based on customer affordability constraints,” said the group.
“The group will continue to review its credit growth appetite as the environment improves, supported by additional interest rate cuts.”
The group’s Financial Services segment’s revenue also increased by 6.4% to R472 million. Debtors’ interest and fees were up 6.0% and Mr Price Insurance increased 7.3%.
“Persistent tightening of the credit granting scorecard through this challenging cycle has enabled the group to keep its net bad debt to book ratio at industry low levels and remains adequately provided for.”
“While there may be opportunity in an improving credit cycle, the group remains cautious in its credit granting posture and will be led by customer affordability metrics.”
Outlook
“South Africa’s economic outlook has improved since the general elections in May. A collaborative Government of National Unity has brought renewed optimism and has established a platform to support higher economic growth,” said the group.
“The group anticipates that the persistence of economic and consumer pressures experienced in H1 will begin to ease. Lower in inflation, interest rate cuts and the implementation of the two-pot retirement system will buoy disposable income and discretionary spending.”
“The group planned its festive season inventory intake early to mitigate supply chain risks and ensure that it has optimal stock levels … The festive trading period is a key time in the retail trading calendar and places additional demand on all components of the business.”
Read: Big changes for Airbnb and short-term rentals coming for South Africa – what you need to know
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