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Investors unimpressed as Mr Price shows Christmas sales drop

Cape Town - Investors reacted negatively to news that retailer Mr Price [JSE:MRP] recorded a 0.5% drop in total sales to R6.1bn in its third quarter to December 31. The stock showed a 4.63% drop to R156.27 on the JSE shortly before noon.

The company recorded growth in retail sales and other income of 0.4% to R6.4bn over the corresponding period in the prior year, the group announced on Tuesday. On a reporting week basis which adjusts for a 53rd week in the base and is a more accurate basis on which to measure performance, sales growth in corporate owned stores was as follows:

 - MRP Apparel: total comparable sales -1.1%; store sales -3.3%;
 - MRP Sport: total comparable sales 2.6%; store sales -4.9%;
 - Miladys: total comparable sales -0.6%; store sales -1.2%;
 - MRP Home: total comparable sales 1.2%; store sales -1.0%;
 - Sheet Street: total comparable sales 5.0%; store sales 4.8%; and
 - Total: total comparable sales 0.0%;  store sales -2.2%.

On the same basis, monthly sales growth reflected an improving trend in festive season trade. Group sales in December increased by 3.9% as follows:

 - MRP Apparel: total comparable sales 4.3%; store sales 2.2%;
 - MRP Sport: total comparable sales 1.9%; store sales -5.0%;
 - Miladys: total comparable sales 4.0%; store sales 3.1%;
 - MRP Home: total comparable sales 2.0%; store sales -0.8%;
 - Sheet Street: total comparable sales 5.3%; store sales 5.2%; and
 - Total: total comparable sales 3.9%;  store sales1.6%.

Cash sales, which make up 83.2% of total sales, fell by 0.5%. However, credit sales growth went up 0.3% over the corresponding period.

The debtors' book, which grew by 1.8% at period end, continued its positive performance, with collections for the quarter exceeding forecast.

Poor economic growth, low levels of consumer confidence and higher selling prices driven by a weak and volatile exchange rate have resulted in persisting high levels of price discounting and promotional activity. Because of retail selling price inflation of 10.8%, higher promotional markdowns were needed, particularly in MRP Apparel, said the group.

Other income grew by 23.7% to R284.4m, with double-digit growth being achieved in all major revenue types, namely debtors' interest and fees, cellular and insurance.

Mr Price does not foresee any significant improvement in economic growth and consumer health but is hopeful that a more settled economic environment will aid planning and result in lower merchandise input costs.

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