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JOHANNESBURG, Nov 21 (Reuters) - South African budget retailer Mr Price Group Ltd said on Thursday its interim profit dropped over 10%, as its apparel division was affected by an “imbalance” in its product assortment and weak economies at home and abroad.
Mr Price, known for its no-frills clothing and furniture stores, has grown for more than three decades by undercutting competitors and catering to thrifty shoppers’ fashion needs. The South African company, however, has struggled amid a tough retail environment and economic slowdown in key markets.
Its headline earnings per share, the main profit measure in South Africa, for the 26 weeks ended Sept. 28 stood at 443.2 cents compared with 494.3 cents last year.
Falling comparable sales at the apparel division dented its first-half performance. An imbalance in its product mix resulted in excess stock that required markdowns to clear, the company said.
Mr Price faces stagnant economic growth, high unemployment and rising cost of living in its home market South Africa, while other economies in the continent have also struggled.
“While trade has been challenging, the energy across the business is high and the team is clear on what is needed to return the group to its winning ways,” the company said in a statement, adding that it was focused on winning market share, especially in apparel, and a shift in momentum was underway.
Sales in the apparel division declined 4.3% to 5.8 billion rand ($393.17 million), on a comparable basis. The unit also constitutes almost 70% of retail sales outside of South Africa, which were down 2.2%.
Total revenue, however, was up 2.6% at 10.8 billion rand, despite a 1.5% drop in retail sales on comparable basis. The home segment reported sales growth of 3.2%.
“A short-term recovery in the consumer environment seems unlikely,” Mr Price said, adding that meaningful growth in South Africa will only return when broad-based structural reforms gain traction.
$1 = 14.7520 rand Reporting by Emma Rumney, Editing by Sherry Jacob-Phillips