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Mr Price expects half-year profit to surge by up to 40%

It’s set to place the group back at pre-pandemic levels.
The group’s profit increase could have been closer to 50% if not for asset write-offs resulting from the July unrest, which saw 111 of its stores looted. Image: Supplied

Clothing and homeware retail giant Mr Price Group expects its half-year profit for the period ended October 2 to increase by between 30% and 40%, its performance boosted by improved retail trading performance.

The JSE-listed company reported in a Sens trading update on Wednesday that it expects its headline earnings per share (Heps) for the period to increase by between 433.6 cents per and 466.9 cents per share.

The group’s projected performance for the current period indicates a rebound in profit to pre-pandemic levels.

In the 2020 half-year period, the retailer experienced a major slump in profit that was aggravated by harsh lockdown restrictions.

Read: Mr Price gets CompCom backing for R500m YuppieChef deal

“In this affected base, all the group’s South African stores were closed during the nationwide lockdown between 27 March and 30 April 2020, with additional subsequent trading restrictions enforced due to the Covid-19 pandemic. Heps declined 24.8% in this corresponding period,” Mr Price noted.

Retailer recovery ‘expected’

FNB Wealth and Investments portfolio manager Wayne McCurrie tells Moneyweb this rather fast recovery is to be expected from retailers like Mr Price, even in light of the country’s massive job losses over the past two years and the record-breaking unemployment rate.

“We are seeing this from many companies in fact – most retail companies are now back to pre-Covid, pre-unrest levels … the economy is more resilient than people think,” says McCurrie.

“…consider that we are still 600 000 jobs fewer now than pre-Covid, and even though the economy is recovering, it’s still lower than where it was pre-Covid, and yet the retailers all seem okay.

“They [retailers] are increasing profit, they are increasing turnover, they are getting the pricing power and they are getting a little bit of margin.”

Read: Dis-Chem resumes interim dividend

July unrest suffocates growth

However, had it not been for asset write-offs incurred because of the July unrest, which saw 111 stores (about 7% of the group’s store count) looted, the group would have seen its profit increase by between 40% and 50% to between 466.6 cents per share and 500.3 cents per share in the period.

“The group continues to carry the costs of the looted stores since the looting despite not being able to trade and generate income,” Mr Price said.

The group has received an interim insurance payment of R181 million from the South African Special Risks Insurance Association (Sasria) and said it anticipates further payments in the second half of the year.

“The associated business interruption losses continue to be assessed and the group anticipates further insurance payments to be received in H2 FY2022 and H1 FY2023,” it clarified.

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