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MR PRICE GROUP LIMITED
Registration number 1933/004418/06
Incorporated in the Republic of South Africa
ISIN: ZAE000200457
LEI number: 378900D3417C35C5D733
JSE and A2X share code: MRP
("the company" or "the group")
Q1 TRADING UPDATE FOR THE 13 WEEKS ENDED 29 JUNE 2024
During the first quarter from 31 March 2024 to 29 June 2024 (the
Period) of the financial year ending 29 March 2025, the group
recorded retail sales growth ahead of the market, gaining 90bps
of market share (RLC) at improved GP margins than the
corresponding period.
Group retail sales growth of 4.6% (2-year CAGR: 12.9%) increased
to R8.5bn, ahead of the total comparable market's retail sales
growth which decreased 0.2% (the market reflected four
consecutive months of sales decline until end May 2024). The
group has gained market share for 11 consecutive months and on
a 12-month rolling basis has gained just over R1.1bn in market
share.
The group previously reported in its annual results outlook that
trade in April and May 2024, the first two months of FY2025, was
subdued due to the factors outlined under the 'operating
environment' below. During these two months the group grew
retail sales by 0.9% compared to the comparable market's decline
of 4.6%. Retail sales growth accelerated in June to 12.7%
compared to the market's growth of 10.3%.
Pleasingly, these sales trends were similar across all trading
segments. Gross margin % increases were achieved in every
division during the Period, due to lower markdowns, resulting
in more full priced merchandise sales, supporting the group's
focus on profitable market share gains. The three recent
acquisitions delivered the highest sales growth in the business.
Operating environment
While the prospects for higher economic growth in South Africa
appear promising, household finances remain under pressure. High
interest rates, increasing debt and elevated food inflation
collectively continued to impact disposable income. The retail
sector was further impacted by several factors:
- The movement of Easter and school holidays into March 2024
(the company's prior period), impacting sales performance
in April 2024
- Significantly higher average temperatures in April and May
2024, resulting in delayed consumer spend on winter
merchandise
- The late onset of cold weather in June 2024, which was
supported by pent-up consumer demand for winter
merchandise
- The South African national elections, as consumers
withheld spend in anticipation of the election results.
Following the formation of the Government of National
Unity, positive consumer sentiment supported improved
sales performance across the sector in June 2024
Despite the macroeconomic and consumer challenges, the group's
differentiated fashion-value business model has continued to
outperform the market.
Group performance
Group retail sales grew 4.6% to R8.5bn and comparable store
sales increased 0.1%. Other income increased 9.3% to R321m due
to a higher average debtors' book, while debtors' interest and
fees increased 6.6%.
South African retail sales grew 4.3% to R7.8bn while non-South
African corporate-owned store sales increased 8.5% to R668m.
Total store sales increased 4.6% while online sales, which
contributed 2.4% to retail sales, increased 3.8% during the
Period, and accelerated to double digit levels in June 2024,
driven by Mr Price Apparel. The group's e-commerce strategy
remains focused on a holistic blended retail offering, aligned
with most South African consumers' preference for online
browsing and in-store purchasing.
Group retail selling price (RSP) inflation of 2.2% was carefully
managed, despite lower markdowns across the group which
contributed to an increase in more full-priced sales. Total unit
sales increased 2.4%.
The store footprint increased by 35 stores (net of closures) and
the group's total footprint expanded to 2 935 stores. Weighted
average trading space increased 5.4%.
Cash sales, which constitute 87.5% of total retail sales,
increased 5.2% while credit sales increased 0.3%. Demand for new
accounts was high during the Period, up 42.7%. However, the
group's approval rate remained low at 18.7% as it continues with
its measured approach to credit granting in a challenging
consumer environment.
The group has remained focused on stock management, ensuring
that it exits winter in a clean inventory position and
transitions seamlessly into spring/summer with fresh merchandise
inputs.
Segmental performance
Retail sales Cont. to
growth retail sales
Q1 FY2025 vs FY2024
Apparel segment 4.4% 78.8%
Home segment 3.7% 17.8%
Telecoms segment 13.3% 3.4%
Group 4.6% 100.0%
Retail sales in the Apparel segment grew 4.4% during the quarter
(2-year CAGR: 16.3%), accelerating to 13.6% in June. Mr Price
Apparel gained 100bps of market share and the division has now
gained market share for 11 consecutive months. Power Fashion's
momentum continued into the Period as their accessible price
points and differentiated fashion, delivered value to its low
to middle income customer base. The division has now gained
market share for 29 consecutive months.
Mr Price Kids continues to perform strongly as the department,
aided by its standalone concept expansion, gained 60bps market
share over the Period.
The Homeware segment continued to report improved performance
with retail sales growing 3.7% during the Period. The group is
confident that its strategic initiatives are proving effective.
Mr Price Home gained market share in May and all Homeware chains
grew ahead of the market and gained market share in June 2024.
The Telecoms segment continued its high growth performance
during the Period, increasing retail sales by 13.3%. Further
expansion into Mr Price Cellular standalone stores continued,
supporting market share gains of 80bps to a new market share
high, according to GfK (latest data available May 2024).
Outlook
Prospects in South Africa are improving with a positive growth
outlook based on a favourable election outcome, no loadshedding
for over 100 days and the onset of a consumer confidence
recovery. Despite the positive outlook, it is anticipated that
the medium term will remain challenging for consumers until key
relief factors come into effect.
Lower inflation, interest rate cuts and the two-pot retirement
system all support a better consumer spending environment.
However, it is likely that the influence of these events on real
wage growth and consumer expenditure will only take effect
towards the end of 2024 and into 2025.
As a result, management remain focused in the short term on
continuing its profitable market share gains, while ensuring
that its brands are well placed to benefit from the anticipated
consumer recovery in the medium term. The group's EDLP model and
its market leading brand strength in South Africa place it in a
strong position to benefit from future gains.
Supply chain volatility remains an imminent risk, as the
disruption to routes through the Red Sea impact global shipping
lines. The group is well prepared for possible disruption and
has planned accordingly to ensure that stock arrives timeously
for the important festive trading period.
Management extends its welcome to all shareholders and analysts
to its inaugural Capital Markets Day on 12 and 13 September
2024.
The above-mentioned figures and information contained herein do
not constitute an earnings forecast or estimate and have not
been reviewed and reported on by the Company's external
auditors.
Durban
22 July 2024
JSE Equity Sponsor and Corporate Broker
Investec Bank Limited
Date: 22-07-2024 07:05:00
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