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Mr Price Profit Gains on Cash Sales Amid South African Slump

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May 27 (Bloomberg) -- Mr Price Group Ltd., a South African clothing and household-goods retailer, said full-year profit gained 22 percent as it focused on customers paying in cash amid falling consumer confidence.

Earnings per share excluding one-time items rose to 7.15 rand in the year through March, the company said today in a statement. That was in line with the 7.14-rand average estimate of 13 analysts surveyed by Bloomberg. Net income also gained 22 percent to 1.87 billion rand.

“Our cautious approach to credit has resulted in cash sales growth of 16.1 percent outstripping credit sales growth of 9.6 percent,” Chief Executive Officer Stuart Bird said in the statement. “We may have lost some sales opportunities by restricting our credit growth, but we are confident that this approach remains the right one.”

South African retailers have been struggling as consumer spending slides amid high unemployment and rising inflation. The country’s retail-sales growth slowed to 1 percent in March from 2.3 percent the previous month, while the economy contracted during the first quarter for the first time since a 2009 recession.

Mr Price’s target customers are in the mid-to-high-income bracket and have been less affected by rising inflation and interest rates, the company said. That could change if those trends continue and shoppers are forced to alter spending habits and reduce debt, it said.

Mr Price shares fell 0.9 percent to 166.99 rand as of the market close in Johannesburg, paring their gain for the year to 2 percent. That compares with a 3.7 percent increase on the 11-company FTSE/JSE Africa General Retailers Index.

Cash sales, which make up almost 81 percent of Mr Price’s total revenue, will probably increase as the Durban-based company expands in Africa, Bird said. Sales in Nigeria and Ghana almost doubled over the year while online sales increased threefold, according to the company.

To contact the reporter on this story: Janice Kew in Johannesburg at jkew4@bloomberg.net

To contact the editors responsible for this story: Celeste Perri at cperri@bloomberg.net John Bowker, Robert Valpuesta