Clothing and homeware retailer Mr Price says it has seen purposes for new retailer accounts rising by 45.5% in the 26 weeks ended 1 October 2022, displaying proof that the customers’ rand isn’t stretching as far as it used to.
The group, which launched its half-year financials on Thursday, says that the surge in retailer credit score purposes reveals that its customers are going through “increased pressure on households’ disposable income as household savings diminish due to inflation and interest rate increases.”
For the JSE-listed retailer which runs a majority money enterprise – with money gross sales constituting 84.9% of group retail gross sales – this era has seen the next development in credit score gross sales than money gross sales, which registered a 5.2% improve.
“The group’s credit sales grew ahead of cash sales at 11.5% (contribution: 15.1% of retail sales), driven by new account sales growth up 20%.”
“Growth within the existing credit customer base was robust and the One Store Card facility added sales of R242 million during the period,” the group stated.
Maintaining a cautious stance nevertheless, the group says in mild of Transunion Consumer Credit Index knowledge for the second quarter of 2022 – which reported that the credit score setting is displaying indicators of sharp deterioration – it has no plans to push the envelope on credit score.
“The group has no appetite to push the credit channel outside of its long-established low-risk tolerance and reduced its approval rate by 640bps to 27.1%.”
“The declined account applicants are increasingly converting to the group’s lay-bye offering, positively impacting the group’s cash sales.”
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Key metrics
The group registered development for key metrics regardless of working in a tricky setting throughout this era, which was made worse by intensified energy cuts – inflicting the retailer to lose roughly 80 000 buying and selling hours – as nicely as the inconsistent and non-payment of social grants, which impacts the shopping for energy of a major chunk of the retailer’s customers.
Group income elevated by 6.5% to R13.3 billion, with the group gross margin increasing by 60 foundation factors and expense development remaining managed and rising by 5.9%.
Headline earnings per share elevated by 10.6% to 496 cents, up from 448.3 cents in the earlier interval.
The group declared a double-digit improve in its interim dividend of 10.6%, to 312.5 cents per share.
“The top-line performance did not meet our internal targets, but our market-leading retail performance post Covid-19 – with sales growth of 37.8% in the base, in which we gained further market share – was always going to present a challenge,” CEO Mark Blair stated in a press release.
“I take comfort that the systems impact in particular is once-off and we have achieved a significant milestone in our Retail Modernisation Programme aimed at de-risking our IT environment and establishing an infrastructure to support our ambitions.”
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While the group expects the buying and selling setting to stay difficult, and for the retail credit score setting to tighten in coming month, it’s wanting ahead to customers being redirected to its core shops as they appear for funds pleasant buys amid powerful financial occasions.
“It’s been a tough period for trading. But against all the uncertainty, we’ve gained traction on our strategy implementation,” Blair stated.
“Our acquisitions have been value-accretive; we launched the Mr Price Baby concept; proved the business case for a rollout of Mr Price Cellular stores; closed out the Studio 88 acquisition; were recognised as the only fashion-value retailer in the FTSE/JSE Responsible Investment Top 30 Index; and carried out an extensive organisational design review to ensure we have the capacity and skills to execute our long-term plan. I am immensely proud of the dedication and energy of all our associates,” the CEO added.