Mr Price

  • Mr Price released a solid set of interim   results for the six months to September 2021, despite the challenges from   Covid-19 which mainly impacted the first quarters’ results. Supply chain   disruptions and a downturn in consumer spending were major impediments. Other   challenges, include the looting of 111 stores in KZN and Gauteng, resulted in   a loss of R320m, equivalent to 3.7% of sales.

  • Despite the many   obstacles facing the company, such as manufacturing costs rising 8.1% year on   year in October 2021, Mr Price was able to keep to its formula of low prices   as a discount fashion retailer, with the flexibility of reducing margins on   selected product lines.

  • Robust growth in revenue   of 35.2% to R12.4bn resulted in operating profit increasing by 48.9% to   R1.7bn. HEPS rose 33.7% reflecting an outstanding delivery by the management   team of this quality diversified retailer.

  • Strong cash generation,   aided by the 85.7% largely cash-focused nature of its business model, enabled   the company to declare an interim dividend per share of 282c per share, an   increase of 34.4% compared to the 2020 interim dividend.

  • This increase was   achieved despite capex for the continuing rollout of new stores and   acquisitions. The most significant buyout was Power Fashion, which still   resulted in closing cash on the balance sheet of R3.9bn at the end of the   interim reporting period. The Power Fashion acquisition fills a gap in the   group, enabling it to increase its presence and volumes in the lower LSM   markets.

  • Mr. Price’s apparel   division has gained market share for 19 consecutive months with its offering   of discount merchandise and fashion at affordable prices, which highlights   the strength and defensive nature of its largest and most profitable business   segment.

  • Around 40% of its   merchandise is sourced in SA which should be a positive aspect, resulting in   a more flexible supply chain with rapid merchandise delivery in a world with   global supply concerns.

  • The strong brand of the   Mr Price group is legendary, and the company is classified in the top 20   brands in SA, with a growing following by the Brand Z index.

  • Capital allocation and   acquisitions indicate a proven track record, despite some glitches along the   way.

  • Share buybacks totaled   R165m in 2021.

  • Mr Price has a clear   vision and strategy, and is well-stocked for the festive season. However, it   faces the challenging balancing act of passing on costs to protect profit   margins, and keeping prices low. Mr Price is exploring new market niches such   as school uniforms and baby clothing where it believes it can grow and   synergize its existing business operations. There has been speculation that   Mr. Price was involved in a bid for Long-4-Life’s sports division, consisting   of Sportsman’s Warehouse and Outdoor Warehouse, which would be a good fit.   This is part of the acquisition philosophy of the group to build on the   existing core operations using a strong balance sheet. This could be a   positive for the group, should a deal materialize.

Mr Price