Mr Price tightens its credit criteria

Retail giant Mr Price has reported an increase in credit applications, but says it declined a large chunk of these as it adopts a conservative approach to credit extension.

In its latest update on Monday, the group noted that new account applications surged by 42.7% for the first quarter of the year. Despite this high demand, Mr Price maintained a conservative approach to granting of credit and approved only 18.7% of the applications.

The group’s careful stance on credit reflects the current consumer environment, which remains precarious. While cash sales, which make up 87.5% of Mr Price’s total retail sales, rose by 5.2%, credit sales saw an increase of just 0.3%.

This trend mirrors the company’s annual results for its financial year to end-March, in which it reported a similarly high demand for credit — new account applications rose by 18.7% — but a low approval rate of 19.3%.

This trend is consistent with Stats SA’s findings on retail sales. The seasonally adjusted retail trade sales in May showed a 0.6% increase for the three months ending in May compared with the previous three months.

Stats SA said the growth was driven by a 2.9% increase in sales from general dealers such as supermarkets, with April and May marking the first extended period of reduced load-shedding after 18 months of power disruptions.

Year-on-year retail purchases increased by 0.8%. This improvement, though modest according to Investec, was “broad-based across all retail categories except textiles, clothing, footwear and leather goods”.

Investment analyst Chris Gilmour pointed out the clothing, footwear, textile & leather category had been under pressure from Chinese online retailers Shein and Temu, which until recently had not paid import duty or VAT. The impact of this change would be reflected in retail sales figures after July.

Despite economic challenges, there is a silver lining for consumers. The Reserve Bank is expected to decrease interest rates before the end of the year, which could provide some financial relief.

Standard Bank said SA is on the brink of a monetary easing cycle, which, along with slowing inflation, will boost the economy and the creation of employment opportunities.

Mr Price reported higher 13-week sales, helped by three recent acquisitions, as it also gained market share.

Sales for the 13 weeks ended June 29 grew 4.6% to R8.5bn, ahead of the total comparable market’s retail sales, which declined 0.2%, it said in a statement on Monday. Comparable store sales increased by 0.1%, while other income increased 9.3% to R321m due to a higher average debtors’ book, while debtors’ interest and fees increased by 6.6%.

The group’s SA retail sales grew by 4.3% to R7.8bn while non-SA corporate-owned store sales increased by 8.5% to R668m.

Online sales, which contributed 2.4% to retail sales, increased by 3.8% during the period, and accelerated to double-digit levels in June, driven by Mr Price Apparel.

The group has gained market share for 11 consecutive months and on a 12-month rolling basis has gained just over R1.1bn in market share, it said.

The retail operating environment was affected by several factors, it said.

Trade in April and May, the first two months of the group’s 2025 financial year, was subdued due to the Easter and school holidays falling in March, which affected the sales performance in April.

Higher average temperatures in April and May resulted in delayed consumer spend on winter merchandise.

Consumers also withheld spending ahead of the elections in late May, but after the formation of the government of national unity, positive consumer sentiment supported an improved sales performance across the sector in June.

The late onset of cold weather in June was supported by pent-up consumer demand for winter merchandise.

The three recent acquisitions delivered the highest sales growth in the business. The store footprint increased by 35 stores and the group’s total footprint expanded to 2,935 stores.

Prospects in SA were improving, with a positive growth outlook based on a favourable election outcome, no load-shedding for more than 100 days and the onset of a recovery in consumer confidence, Mr Price said.

Supply chain volatility remains a risk as the disruption to routes through the Red Sea affects global shipping lines. But the group said it had planned to ensure that stock arrived timeously for the important festive trading period.

goban@businesslive.co.za
mackenziej@arena.africa