A Mr Price store in Rosebank, Johannesburg. Picture: FREDDY MAVUNDA
A Mr Price store in Rosebank, Johannesburg. Picture: FREDDY MAVUNDA

Listed retail group Mr Price said on Thursday it expects to see a rise in bad debt among customers as the Covid-19 crisis increases pressure on SA's struggling economic.

On Thursday, Mr Price said its debtors book, previously reported at R2.1bn, is expected to come under pressure.

The company said that overall collections had met expectations, but the plight of consumers will affect their ability to manage debt payments in the coming months.

“As a result, we anticipate collections to deteriorate.”

This comes as the group said its stores, e-commerce, head office, distribution centre and call centres will all be closed from Friday until  April 16 2020 because of the lockdown imposed by the government to curb the rapid spread of coronavirus infections.

Mr Price expects making no sales in SA, which accounts for about 92% of the group's sales, over the lockdown period.

In the first three weeks of the 2020 financial year, the group achieved R1.2bn in sales.

“We continue to monitor the information provided by the department of health and will adhere to their recommendations,” the company said.

Initial concerns for Mr Price were about supplies as factories in China closed due to the outbreak. Goods from the Asian country represent about 47% of its order book in terms of imported merchandise as a percentage of sales.

“In the early weeks of the outbreak we acted swiftly to ensure our supply chain was able to adjust to replace the most at-risk merchandise.”

Supply concerns have shifted to demand in recent weeks, the company said.

In the first two weeks of March, before President Cyril Ramaphosa’s announcement on March 15, sales grew 8.6%. Between March 16 and March 24 sales fell 22.1%. Demand for apparel and homeware merchandise has been significantly affected as consumers prioritise hygiene and food related goods.

Mr Price said this trend has been seen about the world as social distancing initiatives have negatively affected discretionary spending.

The focus is now on managing the company's orders effectively  to overcome impending stock build-up.

“Due to the lockdown, it will be impossible or impracticable for orders already placed for delivery between March 27 2020 and April 16  2020 to be manufactured and/or delivered and received per the terms of the original orders.”

“Our aim is to, in good faith, renegotiate new delivery dates when the lockdown period has ceased, and our respective business operations resume.”

The group said it expects further uncertainty, which could significantly decrease demand in the weeks and months ahead, making it hard to predict the full affect that Covid-19 will have on its operations.

Mr Price says it has a strong cash position but it would need to manage its costs. This will be done by reducing capital expenditure, slowing down new space growth and seeking rent relief.

Annual salary increases for head office associates have been delayed until further notice. “In addition, our executive management and board of directors have committed to a cut in salaries and fees.”

Full salary and benefits for March and April will be paid for the company's staff, despite the lockdown, Mr Price said.

The affect of Covid-19 may also affect the declaration of the final dividend for the full year, said Mr Price.

Shares in Mr Price closed 9.5% higher at R128.

gavazam@businesslive.co.za