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MR PRICE GROUP LIMITED - Trading update for the 13 weeks ended 28 December 2019

Release Date: 17/01/2020 07:05
Code(s): MRP     PDF:  
Wrap Text
Trading update for the 13 weeks ended 28 December 2019

Mr Price Group Limited
Registration number 1933/004418/06)
Incorporated in the Republic of South Africa
ISIN: ZAE000200457
LEI number: 378900D3417C35C5D733
JSE and A2X share code: MRP
("the group" or "the company")


During the third quarter (29 September 2019 to 28 December 2019)
of the financial year ending 28 March 2020, the Group recorded
growth in retail sales and other income (RSOI) of 3.5% to R7.4bn
over the corresponding period in the prior year.

Corporate-owned and franchise stores generated total retail sales
of R7.0bn, an increase of 3.3%. Corporate-owned store
performance was as follows:

                         Total    Comparable     Units         RSP
                         sales   Store sales             Inflation

Mr Price Apparel          3.2%          0.1%      5.3%       -1.9%
Mr Price Sport            7.3%          2.6%      0.6%        6.7%
Miladys                   7.5%          3.1%      4.7%        3.3%
Apparel Segment           3.9%          0.6%      4.9%       -0.9%

Mr Price Home             1.2%          0.4%     -1.9%        3.1%
Sheet Street              3.7%          2.5%     -0.2%        3.9%
Home Segment              2.0%          1.0%     -1.3%        3.3%
Group                     3.5%          0.7%      3.6%        0.0%

In October, the group gained market share despite retail sales
growth being muted at 0.3%. Trade was affected by a shift in school
holidays into September and the Rugby World Cup. Markdown activity
was required to manage stock levels going into peak season,
negatively impacting gross margin % in the month.

The group continued to gain market share in November (the latest
period for which RLC data is available), an increasingly key
trading month because of Black Friday. This has changed consumer
spending habits prior to Christmas. Business activity in key weeks
in December was materially affected by stage six rolling power
blackouts and prolonged periods of torrential rain in the inland
areas, partially diluting the anticipated impact of the extra week
of school holidays.

The combined retail sales growth of these two months was 4.7%,
with gross margin % in line with the same period last year.

In May 2019, the group communicated that improvements in Mr Price
Apparel’s high summer performance was expected due to internal
initiatives undertaken. The division has reported enhanced retail
sales growth from -1.2% in H1 FY2020 to 3.2% in Q3 FY2020. The
division’s sales increased by 4.6% over the combined November and
December period, with an improved gross margin %. The division
launched its first beauty range, Scarlet Hill, in an initial 40
stores, with results exceeding expectations.

The Home businesses have felt the effect of lower growth in
household expenditure, particularly on discretionary items.
Despite this, both divisions continue to find opportunities to
deliver superior value to their customers.

South African retail sales grew 3.9% to R6.4bn. Store sales were up
3.7% and online sales up 17.4%. Non-South African corporate owned
stores sales decreased by 1.1% to R500m. Excluding Australia, Poland
and Nigeria (markets either discontinued or with limited stock flow)
sales increased 2.5%.

Trading space increased 2.0% on a weighted average basis and 2.6% on
a closing basis.

Cash sales were up 4.1%, constituting 85.2% of total sales. Credit
sales grew 0.2%.

Other income grew by 6.5% to R438m supported by double digit growth
in mobile and cellular. The in-store cellular kiosks are now in
259 stores.

The group is very focused on effective inventory management and
stock growth at the end of the period was within the targeted low
single digit range.

Consumers continue to be constrained, highlighted by the BER
Consumer Confidence Index remaining negative at -7 index points in
Q4 2019. The group sees this as an opportunity to continue gaining
market share and building on the improved performance in Q3, by
offering quality merchandise at everyday low prices. In line with
the strategic intent to entrench market positioning and to be
viewed by consumers as the people’s value champion, retail prices
were maintained at last year’s levels, as evidenced by RSP
inflation at 0.0%. This had the desired impact of increasing unit
growth by 3.6% and importantly by 5.3% in Mr Price Apparel, the
group’s largest division.

For the period 29 December 2019 to 15 January 2020, not included
in the analysis above, group retail sales momentum continued to
build positively at an improved gross margin % compared to the
same period last year.

The 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.

17 January 2020

RAND MERCHANT BANK (A division of FirstRand Bank Limited)

Date: 17-01-2020 07:05:00
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