Retail group Mr Price has warned of increased cost pressures for the rest of 2022, with consumers expected to remain under financial strain as the cost of living increases.
In its annual financial results published on Thursday (9 June), the group said that while this will present challenges, it also presents opportunities for ‘organisations that embrace uncertainty and pursue growth’.
It added that its business model is well-positioned to navigate an adverse economic climate and that it will continue to differentiate itself by delivering fashion and value at low prices.
“This gives it the advantage of attracting customers trading down from higher price points as well as aspirational value shoppers, supported by its convenient omnichannel store footprint,” it said.
“We have faced two tough years in a row and with all the headwinds it looks like FY2023 will be no different. We will navigate the short term as we always have, with good execution, agility, and confidence. We have good momentum – our growth plan is coming together, and we are excited to welcome the Studio 88 team once we have regulatory approval,” said group chief executive Mark Blair.
“This business and its people are resilient, and I am extremely proud of the way in which everyone has responded, which is testament to our mantra of ordinary people doing extraordinary things.”
Increased volatility
Despite this positivity, the group noted that the way forward is likely to be characterised by ongoing volatility.
“Global supply chain challenges, rising inflation and interest rate hikes are expected to continue, placing pressure on forecasting efforts and the cost of doing business. These knock-on effects will be felt domestically, amidst other previously communicated local challenges, exerting pressure on businesses and households.
“A constrained consumer environment is anticipated to persist for most of 2022 as post-year-end trade has reflected.”
To address these issues, Mr Price said that it aims to minimise as far as possible, the impact of rising input costs on its customers and operations.
“Adequate cover has been taken to protect the group against elevated exchange rate, freight rate and other key cost pressures. To ensure price leadership it has invested in key defensive departments and is holding certain price points while striving to preserve overall margins.
“This will include a focus on attracting customers trading down from higher price points as well as aspirational value shoppers, supported by its convenient omnichannel store footprint.”
Financial results
Mr Price reported strong growth, increasing basic earnings per share 26.9% to 1,298.6 cents. Headline earnings per share (HEPS) grew 20.1% and on a comparable 52-week basis increased 25.9%.
The group grew its annual market share by 140bps according to the Retailers’ Liaison Committee (RLC) and its operating profit exceeded R4 billion for the first time, with the operating margin increasing 60bps to 17.7%.
Total group revenue increased 23.0% to R28.1 billion and on a 52-week comparable basis increased by 25.9%.
Other key figures include:
- Retail sales grew 26% and market share increased 140bps (RLC);
- Sales from organically launched departments totalled R1.2 billion, contributing 4.5% of retail sales;
- Online sales grew 48.2% and contributed 2.9% of retail sales;
- Units sold totalled 276 million, an increase of 35.3%;
- Opened 130 new stores, acquired seven and re-opened 96 of the 111 looted stores;
- Acquisitions of Power Fashion and Yuppiechef are both earnings accretive;
- Overhead expense growth is well contained enabling healthy operating profit leverage;
- The group remains free of financing debt and has a cash balance of R4.6 billion;
- Final dividends declared of 807.7 cents per share, up 25.9% and the payout ratio of 63.0% is maintained.
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