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Johannesburg – Mr Price retail sales increased by a mere 1%, according to its trading update for the 18 weeks ended 6 August 2016.
Following the update, the shares dropped 16% to R184.47 at the close in Johannesburg, the biggest decline since January 15, according to Bloomberg. Almost 6.4 million shares traded, or 4.8 times the three-month daily average.
The share plunge, Business Day reported, essentially wiped off R10bn of the retailer’s market value.
The group attributes its poor sales growth to higher unemployment rates and low economic growth which impacted consumer confidence and spending. A weaker exchange rate also contributed to a retail selling price inflation of 11.2% which translated into 9.1% lower units being sold, according to the statement.
“The recent winter season has been the most difficult we have experienced in well over a decade. Unseasonally warm weather at the start of winter and higher prices from the weaker rand inhibited sales,” the update read.
Its apparel business suffered the most. “Certain product opportunities were missed, the chain was more affected by the heavy discounting of winter product by competitors.”
Miladys in particular had a tough season, showing an 11.2% decline in total sales. The brand is “realigning its customer focus”. Being a largely credit business, it felt the effect of revised credit granting regulations introduced in September 2015.
Income from the group’s other businesses such as financial services and cellular operations grew by 29.6%. For the period, the group recorded an overall growth of 2.3%.
Cash sales were up 2.8% and credit sales were 6.6% lower than the corresponding period.
Sales in South Africa increased by 1.5%. There was little improvement in its external markets, such as Nigeria, as growth was lower at -3.2%,
The group believes it is unlikely that earnings for the half-year to September will exceed the previous year.
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