Mr Price on Thursday (21 November) released its interim results for the 26 weeks ended September 2019, showing strong growth in its mobile and online divisions, despite an overall decline in profit.
Headline earnings per share declined 10.3% year on year to 443.6 cents, while dividends per share were maintained at 311.4 cents. Diluted headlined earnings per share declined 9.6% to 435.9 cents.
Total revenue was up slightly by 2.6% at R10.8 billion (from R10.5 billion before). However, profit before tax was down 11.9% to R1.6 billion. Net profit was down 10.2% at R1.15 billion.
“Shareholders were advised at the presentation of the annual results in May and in the 18-week trading update issued in August, that group results for the first half would be impacted by the under-performance in the Mr Price Apparel division. This is reflected in the results,” the group said.
“Despite this, five of the group’s trading divisions grew sales, gross margins and operating profits, with three increasing operating profits by double digits,” it said.
Sales in Mr Price Apparel declined 1.3% (comparable -4.3%) to R5.8 billion.
The issues causing the imbalance in the shape of the assortment in the second half of the prior financial period continued into the first half of FY2020, resulting in excess stock which required markdowns to clear, the group said.
It said that its new executive team is undertaking a “thorough performance review” to identify significant improvements in operating practices, which is expected to be reflected in sales over the summer period.
However, despite the declines in apparel segment, the retail group noted that online sales were booming. Online sales in apparel grew by 19.7%.
Mr Price Home saw operating profits grow 17.8%, with online sales in this segment ramping up 36%.
Mr Price Sport saw sales growth of 12.2%, with online sales jumping 34.9%.
The group said that the strong growth in online sales highlighted the impact of an imbalanced assortment on the physical store shopping experience.
The Financial Services & Cellular segment reported revenue growth of 10.3% to R743 million and an operating profit growth of 20.7%.
Financial services grew revenue 2.2% to R385 million (interest and charges +5.9%, insurance -4.8%), while cellular and mobile revenue grew 20.7% to R358 million.
Cellular products are now sold through a call centre and 242 store kiosks across the group, with further rollout planned, it said.
Mr Price launched its mobile virtual network operator (MVNO), some four years ago. It uses Cell C’s network, offering deals on airtime, data, handsets.