Wed, 18 Sep 2019

Tough economy put a chill on Mr Price retail sales

22 Aug 2019, 22:13 GMT+10

A tough economic climate has put pressure on Mr Price's fashion retail sales, as customer spending remained constrained, the company said in a trading statement for the first four months of its financial year ended March 28.

Despite its brand being associated with a typically low price point, the company says reduced consumer spending, as well as high unemployment and inflation, have negatively impacted sales, as the country goes through a prolonged dip in economic activity.

"The most significant challenges were faced in Mr Price Apparel, which constitutes 59.5% of group sales," the company said.

In the 18 weeks to August 3, total retail sales - including sales to franchisees - edged up 0.5%.

South African retail sales increased 0.6% to R6.4bn, while sales in non-South African corporate owned stores grew 0.3% to R522.3m.

"Higher-than-desired markdowns were required over the short winter period, diverting customer spend away from full-price merchandise and materially impacting gross margin."

However, data released by Statistics South Africa showed improvement in the retail sector for the month of June, with retail trade sales increasing by 2,4% year-on-year for the month.

"Looking ahead, the trading environment is expected to be challenging as global markets remain uncertain and local economic growth is forecast to be muted in 2019," Mr Price said.

It added that the credit environment continues to be weak, as indicated by TransUnion in their Q2 2019 Consumer Credit Index report. The group said it "does not believe it is currently appropriate to stimulate growth in this channel."

Mr Price shares slumped to R151.90 in mid-morning trade on Thursday, after opening at R175.51.

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