Despite overall trade taking a hit due to the Covid-19 fallout and lockdown, Durban-based national apparel and home retail giant Mr Price Group has seen a surge in online sales and has increased its market share post the ‘hard’ lockdown.
The group said in a trading update for the 20 weeks to August 15, posted in a Sens statement on Thursday, that “online sales post lockdown were up 75%”. It noted that average weekly online sales during the period were “above the levels reported in the week of Black Friday in 2019”.
This surge in online sales, which has been accelerated by the Covid-19 pandemic, is a major trend among most retailers – both traditional ‘brick and mortar’ retailers that have moved into omni-channel trade, as well as online retailers such as Takealot, Zando and Homechoice.
Mr Price said that its “early investment into this [online] channel has allowed it to respond swiftly to the increased e-commerce adoption by consumers.”
While the South African retail market has not seen as significant growth in online retail as the likes of the US and UK have, this year’s coronavirus-induced surge in online shopping is likely to put further pressure on retail landlords that have also been hit hard by the pandemic fallout.
Shopping centre owners have already had to offer most retail chains rental discounts for the lockdown period. Clothing, home and general merchandise retailers were not allowed to trade or faced major restrictions during the initial hard lockdown from late March to the end of April, as well as during the slightly relaxed alert Level 4 period in May.
“The material disruptions stemming from Covid-19 had a significant impact on the group’s trading performance in the first 20 weeks from March 29 to August 15, 2020 [the ‘period’] of the financial year ending April 3, 2021 [‘FY21’],” Mr Price noted in its trading update on Thursday.
“Despite this, performance exceeded internal expectations and the group has gained market share for four months in a row to June 2020.”
Mr Price said that all its divisions had seen their smaller convenience store locations outperforming the major regional shopping nodes.
“Regional retail sales performance has correlated with Covid-19 infections, with the Western Cape and Gauteng most severely impacted over the period. Historically, Gauteng makes the largest contribution to group sales,” it pointed out.
The group also noted that sales within its Miladys division, which has a more mature and conservative customer base, has been impacted with these customers “avoiding regional shopping centres”.
With a higher proportion of credit sales, the group said that “this division is more affected by the general slowdown in the credit environment than the other divisions”.
Mr Price’s biggest divisions are its apparel, home and sports chains.
It noted that overall the group’s customers continued to favour cash as a tender type ahead of credit. It said that post-(hard) lockdown cash sales were up 8.9%, constituting 86.2% of total sales. Credit sales decreased 12.3%.
The group noted that its Mr Price Sport division experienced high demand for fitness and equipment categories after the initial lockdown period. However, the division’s performance had been negatively affected by restrictions on school activities and team sports, as well as gym closures.
Mr Price’s home division is also benefiting from what it describes as the “global trends of increased spend due to a shift to work-from-home and customers wanting to update their living spaces”.
Meanwhile, Mr Price Group secured approval for a possible equity raise during a general meeting on June 29 – and it has not ruled out an equity raise during this financial year.
“The purpose of the proposed equity raise was to strengthen the balance sheet in anticipation of extended Covid-19 lockdowns and resulting trade weakness, as well as to take advantage of opportunistic acquisitions,” it said.
“The group has six months to exercise the authority to raise equity up to the value of 10% of its issued ordinary shares,” Mr Price added in Thursday’s trading update.
“Fortunately, the group’s balance sheet has recovered well from the initial impact of the Level 5 lockdown. While the group continues to evaluate potential acquisitions, at this stage no specific targets have met its strict criteria…. Consequently, the group has no immediate intention to action the equity raise,” it pointed out.
Mr Price Group’s share price traded just under 5% lower, at R125.01, at 13:30 on Thursday.