Mr Price said yesterday that load shedding had dented its revenue to the tune of about R1 billion as it posted a 6% decline in annual profit.
In its group results for the 52 weeks ended April 1, 2023, the retailer estimates that its revenue was severely impacted by the power cuts in the period from September 2022 to March 2023.
“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 R1bn in revenue.
“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 group’s H2 (the second half) performance,” the group said.
Mr Price said it accelerated its energy continuity roll-out plans and an investment of R220m in backup solutions would result in 100% store coverage by the end of June 2023.
“This has had a positive effect with a 5% average sales growth differential in stores pre vs post-back-up power installation. The solutions implemented are predominantly inverters and batteries, which can handle load shedding up to a Stage 8 level while maintaining a lighting level in all stores of 70%,” it said.
Despite the challenges, the group reported that its revenue grew 17% to R32.9bn, when including the 70% acquisition of the Studio 88 Group in October 2022, which brought the total number of stores in the group to 2 702.
However, its annual profit fell by 6% on the back of increased inflationary pressure on consumers and power cuts.
Mr Price flagged headline earnings per share of 1205.7 cents for the year ended April 1, a decrease from 1282.1c a year earlier.
This led to the total dividend declared for the year at 447.1c, maintaining the 63% payout ratio.
Rising inflation, which averaged 6.9% in the 2023 financial year, and interest rate increases totalling 350 basis points, proved to be significant headwinds for consumers.
“These conditions together with load shedding contributed to forecast sales calls not materialising across the sector, resulting in a highly promotional trading environment,” it said.
Its Mr Price Apparel was more impacted by load shedding than other divisions due to its far-reaching store footprint, as well as the nature of its value-focused customer base.
“Management is satisfied with the performance of Miladys and Mr Price Sport, while the double-digit sales growths in Studio 88, now the second largest division in the group, and Power Fashion were pleasing,” the group said.
In the homeware segment, the group was adjusting its business models to the new, more competitive environment and remained confident that both Mr Price Home and Sheet Street would continue to be important growth and profit vehicles in the future.
“Yuppiechef continues to make good progress against its strategic objectives, doubling its store base to 14 stores, with there being a long list of potential locations to build this brand into a true omnichannel, national retailer in the higher income customer segment,” it said.
In the Telecoms segment, revenue increased 4.5% to R1.2bn, while the Financial Services segment revenue increased 18.9% to R829m. Debtors’ interest and fees increased 24.2% due to a higher average debtors’ book and a 350 basis points increase in the repo rate over the period.
Looking ahead, the group said further interest rate increases post-year-end had not meaningfully reduced inflation, resulting in consumers continuing to shift their spending to a greater share of non-discretionary items.
“The trading circumstances detailed earlier are expected to continue throughout H1 FY2024. However an anticipated improved performance from September 2023 should start to be seen – power outages will be in the base, inventory levels should be at desired levels, and hopefully, inflation and interest rates start abating,” it said.
The share price closed 2% higher at R142.58 on the JSE yesterday.
BUSINESS REPORT