March 26, 2020 / 4:48 PM / 4 days ago

UPDATE 1-Retailer Mr Price's sales down 22% since S.Africa declared disaster

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JOHANNESBURG, March 26 (Reuters) - South African budget retailer Mr Price said on Thursday sales have declined 22.1% since President Ramaphosa declared a national state of disaster on March 15 following the outbreak of the coronavirus.

The announcement comes as businesses that do not provide essential goods and services brace themselves for a nationwide 21-day lockdown that starts at midnight.

In the first two weeks of March prior to the declaration, sales grew 8.6% then progressively deteriorated, falling 22.1% from March 16 to March 24 as consumers prioritised hygiene and essential goods over clothes and homeware merchandise, the retailer said in a statement.

Mr Price, known for its no-frills clothing and furniture stores, said it anticipates making no sales in South Africa over the lockdown period. South Africa sales account for 92% of group sales.

“To quantify the potential impact, in the first three weeks of FY 2020, 1.2 billion rand ($69.35 million) in sales were achieved,” it said.

“Energy is now focused on managing the order book as effectively as possible to overcome impending stock build-up.”

The retailer is currently talking to its suppliers to renegotiate new delivery dates when the lockdown is over.

Mr Price could not quantify the full impact of the virus but said there was no doubt that it would materially affect performance in the 2021 financial year.

The lockdown will pile added pressure on an economy that is already in recession and where roughly 30% of the population is unemployed.

It will also wreak havoc on shops’ cash flow, despite a handful of support measures like negotiating lower rent gazetted by the government, as only stores that sell food and medicine will be allowed to remain open.

“In these extremely challenging times, we take comfort in our strong cash position. As a value retailer with a strong balance sheet, we will be better positioned than most,” Mr Price said.

As part of managing costs, the retailer is exploring reducing capital expenditure, slowing down new space growth and seeking rent relief.

Annual salary increases for head office associates had been delayed until further notice, while its executive management and board of directors had committed to a cut in salaries and fees as part of managing costs, Mr Price said.

“The impact of COVID-19 may also affect the declaration of the FY 2020 final dividend. This will be considered during the FY 2020 year-end process,” it added.

It also expects its 2.1 billion rand debtors’ book to come under pressure. ($1 = 17.3042 rand) (Reporting by Nqobile Dludla. Editing by Jane Merriman and Nick Macfie)

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