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MR PRICE GROUP LIMITED - Trading update to 22 August 2019

Release Date: 22/08/2019 07:05
Code(s): MRP     PDF:  
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Trading update to 22 August 2019

Mr Price Group Limited
Registration number 1933/004418/06
Incorporated in the Republic of South Africa
ISIN: ZAE 000026951
JSE share code: MRP
("the company" or "the group")


During the first four months (18 weeks to 3 August 2019)(the
"Period") of the financial year ending 28 March 2020, the group
recorded growth in retail sales and other income of 1.1% to R7.5bn
over the corresponding period in the prior year ("Corresponding

Total retail sales, including sales to franchisees, of R6.9bn were
0.5% higher than the Corresponding Period, while growths in
corporate owned stores were as follows:

                       Retail    Comparable                   RSP
                        Sales   Store Sales     Units   Inflation
 Apparel Segment
 Mr Price               -2.1%         -5.3%     -1.6%       -0.6%
 Mr Price Sport          9.3%          5.9%      4.0%        5.0%
 Miladys                 3.4%         -1.2%      2.1%        1.7%
                        -0.5%         -3.9%     -1.0%        0.5%
 Home Segment
 Mr Price Home           3.2%          1.7%     -4.4%        8.0%
 Sheet Street            5.4%          2.9%     -5.4%       11.4%
                         3.9%          2.1%     -4.8%        9.1%
 Group                   0.6%         -2.5%     -1.9%        2.5%

It was communicated at the annual results presentation in May,
that the first half of FY2020 was expected to be an extremely
challenging trading period. The continued poor retail environment,
and a generally strong performance in the base relative to the
rest of the market per Stats SA, contributed to the performance in
the Period. In addition, internal factors had an impact and are
outlined below.

Consumers continue to be constrained, which is affecting
propensity to spend. GDP growth, unemployment, inflation and
disposable income remain at levels that are not supportive of
growth in the retail environment.

The corporate store sales performance detailed above reflect some
of the external challenges. Despite these factors, group sales
excluding Mr Price Apparel were up 4.8%, with these divisions
maintaining or improving gross margin percentage.

South African retail sales increased 0.6% to R6.4bn. Store sales
were up 0.2% and online sales up 31.1% to R109.1m. The Mr Price
Apparel online channel achieved sales growth of 21.8%, Mr Price
Home 40.8% and Mr Price Sport 31.3%. Sales in non-South African
corporate owned stores grew 0.3% to R522.3m.

Group cash sales increased 1.4%, constituting 83.6% (Corresponding
Period: 82.9%) of total sales and credit sales decreased 3.5%. The
credit environment continues to be weak as indicated by Transunion
in their Q2 2019 Consumer Credit Index report and the group does
not believe it is currently appropriate to stimulate growth in
this channel.

New store openings and expansions resulted in weighted average
trading space increasing  3.0%. Ongoing strategic space
rationalisation resulted in net weighted average trading space
increasing 1.5%.

Other income grew 9.4%, to R502.7m. Debtors' interest and fees
grew 7.2% to R171.6m. The recent repo rate cut of 25bps will
adversely affect interest income for the remainder of the financial
year. Insurance revenue of R81.1m decreased 5.2% and cellular and
mobile revenue increased 19.4% to R234.6m.

The most significant challenges were faced in Mr Price Apparel,
which constitutes 59.5% of group sales. The core elements of our
business model and past success, being category dominance and
clarity of offer, were compromised by an imbalance in the shape of
the assortment. These same issues were present in H2 of the prior
financial period and caused excess inventory carry into winter.
Higher than desired markdowns were required over the short winter
period, diverting customer spend away from full-price merchandise
and materially impacting gross margin.

The new executive management team has devoted significant time to
undertake detailed merchandise process reviews across the business
with emphasis on Mr Price Apparel. Clarity on where corrective
action was required has been achieved and remedial action has been
taken. As communicated in May, it was not anticipated that the
effect of these initiatives would impact winter trading, but they
are expected to positively influence performance leading into H2.

Group winter inventory was cleared to acceptable levels by the end
of the Period.

Early signs of a performance recovery into spring and summer have
started to emerge. Group retail sales in the last two weeks of the
Period grew 3.6% (Mr Price Apparel +0.3%) and in the two weeks
after the Period to 17 August grew 6.9%(Mr Price Apparel +4.3%)
against a strong performance in the Corresponding Period.

Looking ahead, the trading environment is expected to be
challenging as global markets remain uncertain and local economic
growth is forecast to be muted in 2019. Despite this, management
is optimistic that an extremely talented group of associates, re-
focused on entrenching proven disciplines and providing customers
with exceptional value, should deliver market share gains,
whatever the economic environment.

The above-mentioned figures and information contained herein do
not constitute an earnings forecast and have not been reviewed and
reported on by the company's external auditors.

22 August 2019

RAND MERCHANT BANK (A division of FirstRand Bank Limited)

Date: 22/08/2019 07:05:00
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