Johannesburg - Mr Price Group’s interim results were knocked as consumers cut back spending and increased competition enters the affordable clothing segment.
In the 26 weeks to October 1, the company recorded normalised diluted headline earnings per share of 360.4 cents, down 4.9 percent from the prior year. This measure strips out foreign exchange impacts. Adding this impact back in, the company’s headline earnings per share came in 13.7 percent lower at 351.2c.
Its interim dividend of 228.2c per share is down 8 percent.
This comes as revenue grows 1.5 percent to R9.2 billion, with retail sales increasing by 0.4 percent despite increases in stores. Without new stores, with space growing 3.6 percent, retail sales dropped 3.2 percent to R8.6 billion.
Cash sales, which account for 82.6 percent of all sales, gained 1.9 percent. Mr Price says credit sales continue to be affected by introduction of new credit regulations in September 2015, and declined by 6.2 percent.
Selling price inflation was 11.4 percent and unit sales were 10.2percent lower.
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“We were happy with the earnings growth in four of our six trading divisions,” says CEO Stuart Bird in a statement issued on Monday.
“Despite the challenges brought about by a poor economy and resulting constrained consumer environment, they held or improved their gross profit margins, managed costs and delivered good profit growth. However MRP Apparel, which represents 59.3 percent of group sales, and Miladys performed well below expectations.”
Sales in MRP Apparel declined by 0.5 percent to R5.1 billion.
Mr Price says the poor economic environment, revised credit-granting regulations, late arrival of winter weather and higher prices caused by the weak rand were all contributing factors.
The pressure on the retail space has intensified with the entry of lower-priced international brands such as H&M, Zara and Cotton On.
“While trade at month ends is up on the previous year, during the middle of the month discretionary spending on apparel has been significantly curtailed, indicating considerable pressure on consumers and diversion of spending to food and other essentials, it says. In this tighter environment competition has intensified and customers have become accustomed to heightened promotional activity and price discounting.
“We should have taken winter markdowns earlier. Our assortments and marketing should also have been more focused on value rather than fashion in this climate. A drive to enhance our value offer is currently being implemented by the merchandise teams at MRP,” concedes Bird.
“We expect trading conditions to remain difficult in the second half with no relief in sight for the embattled consumer. Much will depend on the Christmas trading period and when the major sales of summer merchandise in the apparel sector start. All our businesses are adapting rapidly to the changed and more difficult trading environment and will be fighting to maintain or increase their market shares in the months ahead,” Bird notes.
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