Mr Price Group FY2023 Revenue Surges 17%, Battling Loadshedding and Retail Competition

  • Mr Price Group Limited reports a 17.0% increase in group revenue for FY2023, reaching R32.9 billion.
  • Loadshedding and a competitive retail environment impact the company's performance, leading to modest growth in EBITDA and declines in earnings per share.
  • Mr Price Group declares a cash dividend and invests in backup power solutions to address loadshedding challenges.
Published by
Lethabo Ntsoane

Mr Price Group Limited released its preliminary group results for the 52 weeks ending April 1, 2023. Despite facing various challenges in the retail industry, the company reported a significant increase in group revenue and announced the declaration of a cash dividend.

During this period, Mr Price Group recorded a 17.0% rise in group revenue, reaching R32.9 billion. This growth can be attributed to the acquisition of a 70% stake in the Studio 88 Group, which expanded the company’s total store count to 2,702. However, the company encountered obstacles such as loadshedding and a highly competitive retail environment that impacted its overall performance. Loadshedding, in particular, significantly affected the company during the festive season, resulting in a modest annual increase in EBITDA of 5.4% to R7.2 billion.

Despite experiencing declines in basic and headline earnings per share, with decreases of 6.8% and 6.0% respectively, Mr Price Group maintained its dividend payout ratio of 63%. As a result, the company announced a final dividend of 447.1 cents per share.

Loadshedding, characterized by scheduled power outages, had a detrimental effect on Mr Price Group’s core trading divisions in the latter half of the financial year, particularly during the crucial festive season. Insufficient investment in backup power infrastructure prior to September 2022 left 37% of the core business without backup power, leading to an estimated annual revenue loss of approximately R1 billion. The impact of loadshedding on customer shopping behavior, coupled with lower consumer confidence, further contributed to the company’s challenges in the second half of the year.

To address the loadshedding issue, Mr Price Group expedited its energy continuity rollout plans and invested R220 million in backup power solutions. By the end of June 2023, all stores are expected to have 100% coverage. The implemented solutions, primarily involving inverter and battery systems, have already demonstrated positive effects, with an average sales growth differential of 5% in stores before and after the installation. These solutions can handle loadshedding up to a stage 8 level while maintaining a lighting level of 70% in all stores.

The company also faced additional pressures from rising inflation, increased interest rates, and intense competition in the retail sector. Real wage growth experienced a decline of 3.3% in Q4 2022, impacting Mr Price Group’s customer base, which consists of cost-conscious individuals in the low-to-middle-income range. Heavy discounting across the sector undermined the company’s commitment to everyday low prices and affected its ability to demonstrate value to customers.

In April 2022, Mr Price Group implemented a new Oracle Merchandise Enterprise Resource Planning system. While it was a significant milestone for the company, post go-live stabilization challenges emerged. These challenges disrupted the company’s competitive advantage in in-season trade and the execution of key sales, stock, and margin management planning activities. However, the project was successfully closed on March 15, 2023.

In summary, Mr Price Group reported an 18.0% growth in group retail sales, reaching R31.5 billion, with comparable stores experiencing a 3.4% decrease. The Apparel segment, which contributes 76.8% to retail sales, performed well despite the loadshedding challenges. However, the Homeware segment faced increased competition and a decline in retail sales, while the Telecoms and Financial Services segments showed resilience in a challenging market.

Lethabo Ntsoane

Lethabo Ntsoane holds a Bachelors Degree in Accounting from the University of South Africa. He is a Financial Product commentator at Rateweb. He is an expect financial product analyst with years of experience in reviewing products and offering commentary. Lethabo majors in financial news, reviews and financial tips. He can be contacted: Email: lethabo@rateweb.co.za Twitter: @NtsoaneLethabo