Mr Price lost R1 billion to load-shedding

Mr Price recently reported that load-shedding had cost the retailer an estimated R1 billion in revenue and resulted in an estimated annual loss of 318,000 trading hours.

In its results for the 52 weeks ended 1 April 2023, Mr Price reported a 17.0% increase in revenue to R32.9 billion.

However, the retailer’s gross profit margin declined by 150 basis points to 39.5%. “Higher markdowns, increased input prices due to global inflation effects, currency depreciation and the inclusion of high growth, lower margin acquisitions impacted the gross profit margin,” it said. 

The retailer’s total expenses also increased by 21.2%, driven by the 70% acquisition of the Studio 88 Group. However, excluding Studio 88, Mr Price’s expenses were contained below CPI.

Mr Price’s profit from operating activities decreased by 0.5% to R4.9 billion, and the operating margin decreased by 260 basis points to 15.1% of retail sales and other income.

The retailer’s earnings also took a hit, as basic and headline earnings per share were down 6.8% and 6.0%, respectively. 

According to Mr Price, its core trading divisions were materially impacted by load-shedding in H2, particularly over the key festive season period. 

In addition, at the end of September 2022, backup power was only available in 37% of the company’s core business. 

“As a value retailer, the group had been conservative in its backup power investment, as the historical implementation of load-shedding was manageable until September 2022, after which date it escalated to unprecedented levels,” the retailer said.

“The cumulative quantum of load-shedding from September 2022 to March 2023 was greater than the previous 15 years combined, resulting in an estimated annual loss of 318 000 trading hours, equivalent to approximately R1 billion in revenue.” 

Mr Price said the indirect impact of load-shedding on changing customer shopping behaviour and lower levels of consumer confidence, coupled with the need to markdown higher levels of unsold stock, additionally weighed on the company’s H2 performance.

However, the retailer also said it accelerated its energy continuity roll-out plans, and an investment of R220 million in backup solutions will result in 100% store coverage by end-June 2023. 

“This has had a positive effect with a 5% average sales growth differential in stores pre vs post-backup power installation. The solutions implemented are predominantly inverter and battery which can handle load-shedding up to a stage 8 level while maintaining a lighting level in all stores of 70%.”