Mr Price shares tanked 10.08% on Friday as the market digested the retailer’s warning that despite its business plans to cope with load shedding at its stores, the power crisis was expected to worsen, placing consumers under further financial stress.
It warned that load shedding levels were anticipated to worsen in quarter four of financial year 2023, which would continue to burden business effectiveness.
Chairperson Nigel Payne said, “It is critical for the government to communicate its official and detailed plan for the solution to the energy crisis in South Africa to protect and grow the economy and for business to plan accordingly.
“The current situation is untenable, and the government needs to take decisive action and to be held accountable for implementation.”
For the third quarter of the 2023 financial year, Mr Price’s management had taken the decision to significantly accelerate its rollout of backup power across its existing chains.
It said it was on track to reach its target of backup power in 70% of the group's South African stores by the end of full financial year 2023 and 100% as soon as possible thereafter.
In its trading update for the 13 weeks ended December 31, 2022, released on Friday, the group showed double-digit sales growth from its recent acquistions.
The budget fashion retailer recently acquired Studio 88 Group (S88), Power Fashion and Yuppiechef.
CEO Mark Blair said: "I am pleased with the positive impact that our recent strategic acquisitions are making on the group, which give us exposure to customer segments that we previously did not serve."
It said during the third quarter from October 2, 2022, to December 31, 2022, of the financial year ending April 1, 2023, it had recorded growth in retail sales and other income of 34.0% to R12.4 billion.
Retail sales grew 36.5% to R12bn and on a two-year CAGR basis grew 26.4%. Comparable store sales decreased by 3.9%.
The group reported that total store sales increased by 38.0%, excluding S88 sales.
"Online sales decreased 3.1% (excluding S88: -6.1%) off a strong growth of 51.8% in the prior period, as the sector trend of customers returning to physical stores post-Covid-19 restrictions continued," it said.
Its store footprint increased by 103 new stores with a total footprint of 2 670.
Supported by the inclusion of the recently acquired S88, this was the highest third-quarter sales level achieved in the history of the group.
Load shedding escalated significantly throughout the period.
"According to the national electricity provider Eskom, December 2022, the group's single largest trading month, experienced the highest recorded monthly load reduction of electricity supply, which caused a significant loss in trading hours in the retail sector and inhibited sales growth," it said.
Looking ahead, the retailer warned that the global growth outlook was likely to remain pedestrian despite inflation across most markets appearing to have peaked.
"This outlook will weigh on South Africa’s GDP (gross domestic product) recovery prospects, which have been severely impacted by excessive load shedding, placing strain on both businesses and households, and negatively impacting confidence levels," it said.
Anchor Capital equity analyst Zinhle Mayekiso said Mr Price's third quarter 2023 trading statement update was not well received by the market.
"Although group retail sales growth increased by 36.5% year on year for the quarter, the double-digit sales growth was predominantly driven by newly acquired Studio 88.
"The negative share price reaction was the market's response to the disappointing pedestrian sales growth from Mr Price’s underlying business, which was adversely affected by the effects of load shedding and poor consumer confidence," she said.
The shares traded at R159.55, later closing 7.28% lower from (Thursday’s R177.44) at R164.52 and have decreased by 15.43% in the past year.
BUSINESS REPORT