Election boost for Mr Price

Despite pre-election uncertainty impacting sales, the election of a Government of National Unity for South Africa has spurred consumer demand and led to increased sales for local retailers.

Mr Price has released a trading update for the first quarter of its financial year, which constitutes the 13 weeks through 29 June 2024.

During the first quarter, the retailer recorded sales growth ahead of the market, gaining 90 basis points of market share. Group retail sales growth of 4.6% increased to R8.5 billion, ahead of the total comparable market’s retail sales growth, which decreased by 0.2%. 

This allowed Mr Price to achieve a two-year compound annual growth rate of 12.9%.

The retailer has gained market share for 11 consecutive months and, on a 12-month rolling basis, has gained just over R1.1 billion in market share. 

The company previously reported in its annual results outlook that trade in April and May 2024, the first two months of FY2025, was subdued due to several factors weighing on its operations. 

During these two months, the company grew retail sales by 0.9% compared to the comparable market’s decline of 4.6%. 

Retail sales growth accelerated in June to 12.7% compared to the market’s growth of 10.3%. 

“Pleasingly, these sales trends were similar across all trading segments,” the retailer said. 

“Gross margin percentage increases were achieved in every division during the Period due to lower markdowns, resulting in more full-priced merchandise sales, supporting the group’s focus on profitable market share gains.” 

Mr Price said its three recent acquisitions delivered the highest sales growth in the business. 

“While the prospects for higher economic growth in South Africa appear promising, household finances remain under pressure,” the retailer said. 

“High interest rates, increasing debt and elevated food inflation collectively continued to impact disposable income.” 

It said the retail sector was further impacted by several factors, outlined below –

• The movement of Easter and school holidays into March 2024 impacting sales performance in April 2024 
• Significantly higher average temperatures in April and May 2024, resulting in delayed consumer spend on winter merchandise
• The late onset of cold weather in June 2024, which was supported by pent-up consumer demand for winter merchandise 
• The South African national elections, as consumers withheld spend in anticipation of the election results 

Mr Price said that, following the formation of the Government of National Unity, positive consumer sentiment supported improved sales performance across the sector in June 2024.

This saw Mr Price’s retail sales grow by 4.6% to R8.5 billion, and comparable store sales increase by 0.1%. 

Other income increased 9.3% to R321 million due to a higher average debtors’ book, while debtors’ interest and fees increased 6.6%. 

South African retail sales grew 4.3% to R7.8 billion, while non-South African corporate-owned store sales increased 8.5% to R668 million. 

Total store sales increased by 4.6%, while online sales, which contributed 2.4% to retail sales, increased by 3.8% during the period and accelerated to double-digit levels in June 2024, driven by Mr Price Apparel. 

“The group’s e-commerce strategy remains focused on a holistic blended retail offering, aligned with most South African consumers’ preference for online browsing and in-store purchasing,” the retailer said. 

Group retail selling price inflation of 2.2% was carefully managed despite lower markdowns across the group, which contributed to an increase in more full-priced sales. Total unit sales increased by 2.4%. 

The store footprint increased by 35 stores net of closures, and the group’s total footprint expanded to 2,935 stores. Weighted average trading space increased 5.4%. 

Cash sales, which constitute 87.5% of total retail sales, increased 5.2%, while credit sales increased 0.3%. 

Mr Price said demand for new accounts was high during the period, up 42.7%. However, the group’s approval rate remained low at 18.7% as it continued with its measured approach to credit granting in a challenging consumer environment. 

“The group has remained focused on stock management, ensuring that it exits winter in a clean inventory position and transitions seamlessly into spring/summer with fresh merchandise inputs,” the retailer said.  

Mr Price’s retail sales in its Apparel segment grew 4.4% during the quarter, achieving a two-year CAGR of 16.3%, accelerating to 13.6% in June. Mr Price Apparel gained 100 basis points of market share, and the division has now gained market share for 11 consecutive months. 

“Power Fashion’s momentum continued into the period as its accessible price points and differentiated fashion delivered value to its low to middle-income customer base,” the retailer said. The division has now gained market share for 29 consecutive months.

Mr Price’s Telecoms segment continued its high growth performance during the period, increasing retail sales by 13.3%. 

Further expansion into Mr Price Cellular standalone stores continued, supporting market share gains of 80 basis points to a new market share high. 

Overall, the retailer is optimistic about the industry’s prospects in South Africa.

“Outlook prospects in South Africa are improving with a positive growth outlook based on a favourable election outcome, no load-shedding for over 100 days and the onset of a consumer confidence recovery,” it said. 

However, despite the positive outlook, Mr Price anticipates that the medium term will remain challenging for consumers until key relief factors come into effect. 

“Lower inflation, interest rate cuts and the two-pot retirement system all support a better consumer spending environment,” it said. 

“However, it is likely that the influence of these events on real wage growth and consumer expenditure will only take effect towards the end of 2024 and into 2025.” 

“As a result, management remains focused in the short term on continuing its profitable market share gains while ensuring that its brands are well placed to benefit from the anticipated consumer recovery in the medium term.”