Johannesburg - Retail giant Mr Price Group's shares took a knock yesterday as credit sales continued to be affected by the introduction of new credit regulations and consumers cut back spending amid increased competition in the affordable clothing segment.
The group said its normalised diluted headline earnings per share went down 4.9 percent to 360.4 cents for the 26 weeks to October - down the 4.9 percent reported during the corresponding period last year - stripping out foreign exchange impacts.
The company’s headline earnings per share were 13.7 percent lower at 351.2c, while the interim dividend slumped 8 percent to 228.2c.
Read also: Mr Price knocked on weak economy
But group revenue grew 1.5 percent to R9.2 billion, with retail sales increasing by 0.4 percent despite increases in stores.
Retail sales dropped 3.2 percent to R8.6bn.
Cash sales, which account for 82.6 percent of all sales, gained 1.9 percent.
Chief executive Stuart Bird said the introduction of the new credit regulations in September last year had a major impact on the company’s performance with credit sales declining 6.2 percent.
Unit sales
Bird said selling price inflation was 11.4 percent and unit sales were 10.2 percent lower. He said the company realised earnings growth in only four of its six trading divisions.
“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,” Bird said.
“However, MRP Apparel, which represents 59.3 percent of group sales, and Miladys performed well below expectations,” he said.
Sales in MRP Apparel declined by 0.5 percent to R5.1bn.
Bird said the poor economic environment, revised credit-granting regulations, late arrival of winter weather and higher prices caused by the weak rand contributed to the dimmed results.
He said pressure on the retail space had 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,” Bird said.
“In this tighter environment competition has intensified and customers have become accustomed to heightened promotional activity and price discounting.”
Mr Price shares dipped 2.77 percent to close at R130 on the JSE yesterday.
BUSINESS REPORT