Mr Price Group Ltd., a South African clothing and household goods retailer, said first-half profit gained 24 percent as it focused on customers paying in cash amid falling consumer confidence.
Net income in the six months through Sept. 28 advanced to 747 million rand ($72 million) from 605 million rand a year earlier, the Durban-based company said in a statement today. Sales increased 15 percent to 7.2 billion rand.
“We focused on avoiding chasing credit sales to drive top-line growth and are pleased that cash sales growth of 15.1 percent exceeded credit sales growth of 11.6 percent,” Mr Price said in a statement. “The performance is against a backdrop of low consumer confidence in a challenging retail environment, caused by slowing real wage and credit growth.”
Consumer confidence in Africa’s largest economy dropped to a 10-year low in the third quarter as higher inflation curbed spending. Truworths International Ltd., South Africa’s largest listed clothing retailer that generates 71 percent of its sales in credit, said last week that revenue growth slowed in the 18 weeks through Nov. 3. Mr Price cash sales made up almost 80 percent of total revenue, the company said.
Mr Price shares rose 1.8 percent to 149.89 rand, the most since Oct. 28, by the close in Johannesburg. The stock has gained 7.1 percent this year, compared with a 11.5 percent decline in the 11-member FTSE/JSE Africa General Retailers Index.
“Mr Price cash sales are high and this means they have been able to consistently put good results on the table,” Henre Herselman, a derivatives trader at Nedbank Private Wealth in Johannesburg, said by phone today. “These earnings are brilliant, considering the current retail sector sentiment.”
The company raised its interim dividend 26 percent to 1.68 rand a share.
Mr Price opened two new stores in Nigeria during the six-month period, bringing its total in the West African country to four. Woolworths Holdings Ltd., the South African food-and-clothing retailer, said last week it plans to close its three stores in Africa’s most populous nation because of high rental costs and difficulties with its supply chain.
Stores in Nigeria and Ghana are “performing well,” Chief Executive Officer Stuart Bird said in the statement. Mr Price no longer sees the west African countries as test markets, he said.