Mr Price grows revenue but fails to maintain sales momentum

MR PRICE’s shares declined 5.52% to R202.19 after a slowdown in its first-half sales growth failed to live up to its shareholders’ high expectations.
A senior analyst said the group had lost its “designer look for cheap” edge as it shifted its merchandise styling.
“Two years ago they moved styling mainstream to get more of the young black market. Mr Price became one of the many moving into that space — making them more cyclical due to their exposure to the lower market. They began to buckle when the economy started to go down because of this move,” Sasfin Securities’ Alec Abraham said.

Mr Price reported a 16.7% rise in net income to R1.08bn in the 26 weeks to September 26 — a deceleration from the 23% gain in the same period a year earlier. Revenue grew 9.2% to R9bn with retail sales increasing 8.6% to R8.6bn, with comparable store growth of only 4%.
In Wednesday’s results statement, CEO Stuart Bird blamed a high comparable base in the group’s apparel business, the timing of the Easter school holidays and the late onset of winter. “The economy is not in good shape and consumer confidence is understandably low.
“We were trading off an exceptional performance in the corresponding period last year … (where) Mr Price apparel grew sales by 20% and comparable sales by 15%. In so doing it created an extremely high base to beat in a softer trading environment,” he said.
The group’s gross profit margin of 40.1% was 1.3% lower than last year. The merchandise margin was hit by exchange rates and, to a lesser extent, higher markdowns, and fell 1.1% to 40.7% of retail sales.
Mr Abraham said had the retailer not moved “down-market” and away from the very robust “top end”, the group would have had a more resilient top-line performance.
“Five years ago, what made Mr Price so strong was that their clothes looked like designerwear, but cost you nothing. Their primary market was upper-income groups, the kind of person who had one or two R8,000-a-pair True Religion jeans and would mix it up with Mr Price pieces and it looked really good. At that point they were catering to a niche market.”
Mr Bird said: “The consumer environment could deteriorate further and we will still be up against a very challenging base in the second half of the year.” 

   

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Posted on November 26, 2015, in #retail, #southafrica. Bookmark the permalink. Leave a comment.

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