Mr Price cuts its cloth to suit a higher share price

Credit: Freddy Mavunda

The share price jumped 11% to R169.99 after the announcement. The momentum continued for most of the trading session, with the share eventually closing at R192.25.

Diluted headline earnings per share are expected to rise between 421.4c and 439c.

Portfolio manager at Gryphon Asset managers Casparus Treurnicht said although the company did not give much information, it was clear that the guided range was significantly higher than the market expected.

“After Truworths and TFG came forward last week there might be a combination of short positions being covered and a sigh of relief,” Treurnicht said.

Mr Price’s share price recovery came after it lost 20% in 2016. The main losses came in August 2016 when the company lost 16% in one day after releasing a disappointing trading statement. The share price has since gained about 20% in 2017.

In its 2017 annual results presentation in March, Mr Price CEO Stuart Bird said that the strategy going forward would focus on improving the quality of merchandise while applying an everyday low-price pricing strategy and integrating technology to improve operations and customer experience.

Much like the rest of the retail sector, Mr Price has been affected by weak and declining consumer spending, which continued into the first half of 2017. The retailer’s recovery has been boosted by a number of factors.

Equity analyst at Vele Asset managers Matthew Zunckel said that judging by the positive trading statement the recovery of Mr Price was bumped up by a change in its procurement model, which was the main driver of growth.

The company previously faced issues of procurement and the quality of its merchandise was a constant complaint from consumers in 2016, among other misgivings.