Mr Price shares plunge after retailer warns of lower sales of apparel

Mr Price Group’s shares plunged to their worst level in more than two years after the company said retail sales from fashion stores, its biggest division, fell in the first four months of the new financial year, as SA’s weak economy forced it to slash prices.

“Higher-than-desired markdowns were required over the short winter period, diverting customer spend away from full-price merchandise and materially impacting gross margin,” the retailer said.

In the 18 weeks to August 3, total retail sales — including sales to franchisees — edged up 0.5%.

But retail sales from the company’s own apparel stores fell 0.5% because of a 2.1% decline at the core Mr Price chain. Excluding new stores, sales from that chain fell as much as 5.3%.

Comparable store sales across the group declined 2.5% despite gains in the home segment and Mr Price Sport.

Mr Price’s shares fell as much as 12.2% to R154.12 in early trade on Thursday, the worst level since mid-2017.

“Consumers continue to be constrained, which is affecting propensity to spend,” the group said. “GDP growth, unemployment, inflation and disposable income remain at levels that are not supportive of growth in the retail environment.”

Mr Price said credit-based sales declined amid a “weak” credit environment. “The group does not believe it is currently appropriate to stimulate growth in this channel.”

The group said its new executive management team had reviewed merchandise processes with an emphasis on the apparel unit.

“Clarity on where corrective action was required has been achieved and remedial action has been taken,” it said. 

The group said early signs of performance recovery into spring and summer have started to emerge. Group retail sales in the last two weeks of the period grew 3.6% and in the two weeks following, to August 17, grew 6.9%.

The group said it expected to grow market share “whatever the economic environment”.