Mr Price has seen its profit dip amid a challenging economic environment. In the group’s financial results for the 26 weeks ended 30 September 2023 (H1 FY24), the group recorded growth in revenue of 26.4% to R16.8 billion when including Studio 88 (S88), excluding which revenue grew 3.5% to R13.7 billion.
Compared to H1 FY23, basic and headline earnings per share dropped 10.3% and 9.3% to 448.8 cents and 449.9 cents, respectively.
The interim dividend of 283.5 cents also declined by 9.3% from H1 FY23.
| Financials | H1 FY23 | H1 FY24 | Change |
| Basic Earnings Per Share | 500.1 cents | 448.8 cents | -10.3% |
| Headline Earnings Per Share | 496.0 cents | 449.9 cents | -9.3% |
| Interim Dividend | 312.5 cents | 283.5 cents | -9.3% |
The group said the challenging circumstances from H2 FY23 passed onto the current financial year.
For instance, load shedding was four times higher in Q1 2024 than the same period in the prior year, with the group spending R140 million to acquire backup power systems.
The group said it lost 60,000 trading hours from load shedding over the period, equivalent to approximately R190m in revenue.
In addition, the value customer was severely impacted by double-digit inflation in food and public transport, coupled with rising interest rates.
Elevated inventory levels in the retail sector resulted in a significant promotional retail environment. The higher markdowns were required to remove excess inventory, which impacted gross profit margins.
“Pleasingly, there was a significant momentum shift in Q2, with sales growth improvements in all sales channels, tender types and geographies, resulting in market share gains and an uplift in GP%,” the group said.
“The positive market share trend continued into H2, with market share up 70 basis points (bps) in October 2023, according to the RLC.”
Outlook
The group said that South African consumers will remain constrained in 2024 as the recovery in employment lagged economic activity and real wage growth has been negative.
“The recent improvements in consumer price inflation, fuel prices, currency exchange rates and unemployment will bring some respite to business and consumers. The interest rate cycle is anticipated to turn positive by mid-2024, which will alleviate consumer pressure,” the group said.
“Electricity supply remains a risk to economic activity; however, there is an expectation that the load shedding intensity moderates.”
“An increasing risk to business in South Africa is the instability of port operations. The company will continue to take the necessary steps to minimise this impact, and management is satisfied that the group has adequate stock levels for the upcoming festive season.”
Despite the challenges in the operating environment, it is confident that the positive momentum experienced in Q2 will continue into H2.
The group said that several attractive growth opportunities are available, including Mr Price Kids, which has 16 standalone stores that exceed expectations and can potentially be a significant retail chain for the group.
The group also plans to open roughly 140 new stores during the year through its annual capital expenditure of R1.4 billion.
Although the retail sector faced a problematic October, with the RLC noting that the total market declined by 1.5% over the period, the group saw a growth of 2.3% in retail sales. Retail sales were also up 6.2% in the first two weeks of November.
