Mr Price shows strong growth in a difficult economic environment


Mr. Price SENSE declaration:

During the third quarter (September 27, 2020 to December 26, 2020) of the fiscal year ended April 3, 2021, the group continued its pursuit of market share earnings through its proven fashion value-based, cash-based business model.

This was achieved as market share increased by 230 basis points in October and November 2020 combined, the latest period for which data from the Retailer Liaison Committee (RLC) is available. The group’s total market share during this period is the highest on record since the reinstatement of the RLC (data retroactive to January 2017), with consecutive gains over the past six months.

The group recorded growth in retail sales and other income (RSOI) of 5.0% to 7.8 billion rand compared to the corresponding period of the previous year (corresponding period). Total retail sales of R7.5 billion increased 5.8% and other income fell 16.0% to R253 million.

Retail sales in South Africa increased 5.4% to 6.9 billion rand. In-store sales increased 4.6% with the group’s online channel showing a strong performance, increasing 66.3% (Corresponding Period: 17.4%) from the Corresponding Period. Sales of stores owned by non-South African companies rose 10.2% to R552 million.

Group inflation of 6.8% was driven by price inflation of 3.8% (in line with the CPI and lower than the deterioration in the exchange rate) and by lower markdowns. The Group’s GP margin of 42.5% decreased by 50 basis points as positive gains from lower markdowns were offset by currency effects. Management is confident that it has successfully balanced its defense of key price points with its GP margin level remaining within the identified sustainable range.

Trading space increased 2.1% on a weighted average basis and 1.2% on a close basis. The performance of the group’s diverse store footprint continues to favor convenient locations in front of its regional department stores.

Cash remains the preferred type of bidding for customers and the group’s private label product assortment and selling prices supported cash sales growth of 8.2%, accounting for 86.8% ( corresponding period: 84.9%) of total sales. Credit sales fell 7.6% and the group continued its conservative credit granting stance. Percentage collections of accounts receivable were in accordance with the Relevant Period. The type of additional call for tenders (introduced by Mr Price Apparel during fiscal year 2021) was well received by clients, proving to be an attractive alternative to traditional credit and supporting the group’s growth dynamic.

In October 2020, the group’s retail sales rose to double digits, which continued through the first two weeks of November 2020. Economic assistance provided by the government and the private sector since the start of the pandemic of Covid-19 created temporary financial relief for households and supported consumer spending. . Many of these support programs ceased at the end of October 2020, with the effect being felt in the second half of November 2020. Combined retail sales in October and November 2020 increased by 5.9%.

The retail sector was negatively affected in November 2020 by a weak Black Friday, with data from Bank Serv showing store card transactions down 32.6% in volume and 51.5% in value . One of the main contributors to this decline was Covid-19 compliance requirements, which limited store capacity. Bank Serv signaled a significant shift to the Internet, but that was not enough to make up for lost in-store sales. The group has experienced developments similar to those of the market, exacerbated by its good performance at the base. Despite this, the group outperformed the market in November 2020. During the week of Black Friday, all divisions gained market share and the group increased its online sales by 81.1%.

December 2020 was affected by the emergence of a second wave of Covid-19, creating new uncertainties and cautious consumer behavior, both in their activities and in their spending habits. In addition, a shift in the calendar with fewer school holidays before Christmas and ten days of blackouts have had a negative effect on already depressed pedestrian traffic in shopping centers. Despite this, the group’s sales grew by 5.6% in December 2020 and a positive growth in basket size (units and value) was achieved compared to the corresponding period, which should support share gains of favorable market (RLC data available at the end of January 2021).

The apparel segment (contribution to retail sales: 74.0%) grew 3.9% in the corresponding period, led by the group’s largest company, Mr Price Apparel. The division started the period with an optimal inventory position, supporting its pillars of category dominance and clarity of supply. The assortment of fresh summer goods (including its newly launched categories) and the commitment to limit price inflation have brought high added value to its customers. This resulted in lower markdowns than the corresponding period and supported GP margins. Mr. Price Sport and Miladys behaved in a manner similar to the performance trends previously communicated on November 26, 2020 during the presentation of the group’s half-year results.

The home segment (contribution from retail sales: 23.7%) continued its positive performance, up 10.6% over the corresponding period, with dynamic growth over all months of the period. This has resulted in continued gains in market share. Customer demand for housewares remains high as many employers encourage working from home. The group anticipates a continuation of the strong growth of the house trend.

Mobile terminals and accessories (contribution to turnover: 2.2%) are now available in 306 group stores. Sales grew 22.0% over the period and an increase in market share was achieved (according to GFK), with a GP% higher margin. It continues to be a strategic product offering and a driver of increased customer traffic in stores and online.

The group closed in December 2020 with clean inventory levels, which included the newly launched categories of mrpBaby, mrpSchoolgear and mrp & co. The positive downward trend in markdowns continued in January to date.

The high cash generation continued throughout the period. The group’s good cash flow at the end of December 2020 places it in a strong position to execute its announced capital allocation strategy.

Read also: Mr. Price drops to 14% while the South African consumer “remains constrained”

Outlook

The second wave of Covid-19 in South Africa is proving to be far more contagious and devastating than the first time in 2020. The regression to an adjusted level 3 lockdown from December 2020 has added more uncertainty and challenges to the country’s economic recovery. Households are likely to be cautious in their spending because of the negative impacts on income and the end of government support initiatives affecting discretionary categories.

The group’s business model has proven its worth to date, supported by its differentiated fashion value offer and its solid tax position. If management continues to maintain a cautious vision, the group’s fundamentals will enable it to emerge from the pandemic conditioned to seize growth opportunities.

For the first three weeks of the fourth quarter of fiscal 2021, not included in the above analysis, the group’s retail sales grew 5.3%.

Management would like to recognize the efforts of all its associates, especially its store and supply chain staff, who during the busiest time of the year ensured that the experience of customer purchase is convenient and safe. This required the commitment of each employee and collective teamwork of which the group is extremely proud.

The above figures and any information contained herein do not constitute a forecast or estimate of earnings and have not been reviewed and reported by the Company’s external auditors.

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