South African retailer Mr Price warns of rising costs

By Nqobile Dludla

JOHANNESBURG (Reuters) -South African retailer Mr Price Group Ltd expects high single digit input inflation this year and is using currency and freight hedging to protect against the rising cost pressures, its CEO said on Thursday as annual profits jumped.

Companies around the world are facing high costs due to pandemic disruptions to supply chains and the crisis in Ukraine.

As the cost of living increases, South African retailers are trying to balance passing on the rising costs to consumers and ensuring that their products stay affordable, while protecting margins.

"Adequate cover has been taken to protect the group against elevated exchange rate, freight rate and other key cost pressures," CEO Mark Blair told investors.

In trying to find a balance, the fashion and homeware retailer will use different strategies to try and minimise the impact of these costs on the consumer, CFO Mark Stirton told Reuters.

While Mr Price expects the constrained consumer environment to persist for most of 2022, it sees this driving consumers seeking value to its mostly budget stores, which helped to boost its retail sales by 26% to 26.7 billion rand ($1.75 billion) in the year ended April 2.

Blair said the retailer is targeting turnover of 7.5 billion rand in the next five years from its newly acquired budget clothing retailer Power Fashion and upmarket kitchenware and homeware retailer Yuppiechef. This will be up from the current 2.5 billion rand annualised sales.

Mr Price reported growth of 20.1% in headline earnings per share, the main profit measure in South Africa, and revenue growth of 23% at 28.1 billion rand as consumers coming out of the COVID-19 lockdowns revamped their wardrobes and homes, with acquisitions adding a boost.

($1 = 15.2836 rand)

(Reporting by Nqobile Dludla; Editing by Jacqueline Wong, Rashmi Aich and Jane Merriman)