WOOLIES: 4,550 -58 (-1.26%)
Budget retailer Mr Price hit by slowdown in South Africa
* Shares down more than 13 pct
* Q3 total sales up 2 pct vs 8.5 pct growth in Q3 2017
* Mr Price expects Q4 to remain very challenging
(Adds share drop, details, quotes)
By Nqobile Dludla
JOHANNESBURG, Jan 17 (Reuters) - Shares in South African
budget clothing and furniture retailer, Mr Price Group Ltd
, tumbled on Thursday after it reported a sharp slowdown
in sales growth and warned of a challenging final quarter.
The trading update followed a profit warning from department
store operator Woolworths Holdings on Wednesday,
pointing to a broader malaise and a gloomy outlook for the
retail company results season.
An increase in value-added tax, a rise in unemployment and
inflation levels, coupled with higher fuel prices and an
interest rate increase in November have all conspired to reduce
spending power in South Africa.
"The trading environment in Q4 is expected to remain very
challenging," the firm said.
During the three-months ended Dec.29, group retail sales and
other income grew 3.5 percent to 7.1 billion rand ($517
million), while total sales of 6.7 billion rand were 2 percent
higher. This compared with an 8.5 percent increase in total
sales in the corresponding period.
Comparable store sales were down 0.8 percent.
That result sent the shares tumbling 13.10 percent at 0919
GMT, touching a 2-1/2-month low, while the broader market
fell 0.95 percent.
The Durban-based company pointed to high levels of
competitor price discounting and promotional activity over the
quarter, but said its gross margin percentage improved slightly
on the prior year in all divisions.
The retailer said Black Friday sales were lower while the
Christmas shopping season was impacted by the later start to the
Sales of its biggest apparel division, inched up 0.4 percent
compared with 11.3 percent sales growth in the same period last
"Global and domestic market uncertainty continues and
improvements in the economy and consumer health are likely to be
muted until the risk events settle and the general elections in
South Africa take place in May 2019," the company said.
($1 = 13.7234 rand)
(Reporting by Nqobile Dludla; Editing by Subhranshu Sahu and
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