Mr Price Group on Thursday said the implementation of a new business management software system from Oracle negatively impacted its full-year results for the 52 weeks to 1 April 2023.
The implementation of a new Oracle merchandise ERP system in April 2022 was a “significant milestone” for the retailer, de-risking its legacy, homegrown IT environment and building a firm platform for its growth ambitions.
However, post go-live stabilisation challenges were encountered, resulting in “disruption and significant distraction” to merchant activities. It emphasised that problems like these are “typical” in such large company-
“Mr Price had embarked on the Oracle project to deliver a ‘seamless experience for customers’
“An internal diagnostic performed by management revealed that the system cut over impacted the group’s competitive advantage of in-season trade and the execution of key sales, stock and margin management planning activities over the year,” it said.
Companies often encounter challenges when deploying complex ERP systems, with Spar Group warning just last week that significant difficulties with its implementation of an SAP system had cost it R786-million in lost wholesale turnover in the six months to end-March 2023.
Mr Price had embarked on the Oracle project to deliver a “seamless experience for customers whether in store, on the web or on a mobile device, allowing customers to browse, shop, purchase, track an order, collect or return items through any of these channels”, it said.
The retailer said its Oracle ERP project was successfully closed on 15 March and that the problems are now behind it.
Mr Price reported lower annual profit and fewer sales in its year-end results. The company, valued at R35.9-billion on the JSE, saw a fall of 6% in annual profit on the back of inflationary pressure on consumers and Eskom’s power cuts. Load shedding cost it about R1-billion in revenue.
The cumulative quantum of load shedding from September 2022 to March 2023 was greater than the previous 15 years combined, resulting in an estimated annual loss of 318 000 trading hours, equivalent to about R1-bilion in revenue, the company reported.
The indirect impact of load shedding on changing customer shopping behaviour and lower levels of consumer confidence, coupled with the need to mark down higher levels of unsold stock, also weighed on the group’s second-half performance.
“As a value retailer, the group had been conservative in its backup power investment, as the historical implementation of load shedding was manageable until September 2022, after which it escalated to unprecedented levels,” Mr Price said.
Backup batteries and inverters have been installed, and an investment of R220-milion should see all the group’s stores covered by the end of June.
“The potential higher stages of load shedding throughout winter threaten to extend this disruptive retail cycle. Load shedding has become a permanent and tiresome obstacle to businesses in South Africa and the cost of doing business has materially increased, stifling economic growth,” the company added.
In the telecommunications segment (which made a 3.3% contribution to retail sales), revenue increased 4.5% to R1.2-billion. The in-store cellular merchandise presence increased to 465 stores, and 12 standalone cellular stores continue to perform strongly.
In addition to selling cellular handsets, Mr Price also has a mobile virtual network operator that runs on Cell C’s platform. It sold more than 800 000 cellular handsets and accessories during the year.