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MR PRICE GROUP LIMITED - Trading Update for the 13 weeks ended 1 January 2022

Release Date: 21/01/2022 07:05
Code(s): MRP     PDF:  
Wrap Text
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
("Mr Price Group" or "group" or "Company")

During the third quarter from 3 October 2021 to 1 January 2022
(the ?Period?) of the financial year ending 2 April 2022 (FY2022),
the group recorded growth in retail sales and other income (?RSOI?)
of 19.2% to R9.3bn. This included the recently acquired Power
Fashion and Yuppiechef businesses, excluding which RSOI grew 7.2% to R8.3bn.
The group attributes its positive momentum to strong execution of
its diversified and differentiated, fashion-value business model.
This is despite the external challenges of significant trading
hours lost due to load shedding during the Period and the group
commencing the quarter with 41 unopened looted stores.
Additionally, the group?s market leading performance during the
third quarter of financial year 2021 (27 September 2020 to 26
December 2020 referred to as ?FY2021 Period?), where it grew retail
sales 5.8%, created a firm base relative to the market?s decline
at that time of 3.6%, according to the Retailers? Liaison Committee (RLC).
Focus over the quarter was on selling more full price items in a
retail environment that was highly promotional, particularly the
month of November 2021. The result of this approach was a short-
term loss in market share during October and November 2021, the
months for which RLC data is currently available. Nonetheless the
group?s GP margin was maintained as planned and its strong December
2021 performance provides confidence that it will restore its market share gaining momentum.
The group is confident that its approach over the festive trading
period supported its strategic initiatives, namely, to continue
its retail sales growth momentum (Q3 FY2022: 17.1%; Q2 FY2022:
13.5%), maintain targeted GP margin and manage stock levels effectively.
Retail sales for the group?s corporate-owned stores was as follows: Retail sales growth ? Q3 FY2022 vs FY2021 Apparel segment 19.0% Apparel segment excl PF 6.4% Home segment 8.3% Home segment excl YC 0.7% Group* 17.1% Group* excl PF and YC 5.4% *Includes Cellular (handsets & accessories)
The commentary below relates to key group performance metrics
excluding acquisitions unless specifically mentioned.
South African retail sales grew 5.8% (comparable stores 4.0%) to
R7.4bn. Store sales increased 6.0% as consumers became more
comfortable in the physical retail setting again. This was most
evidenced in the group?s larger format stores located in the super
regional and regional shopping centres which performed strongly.
Non-South African corporate-owned stores sales grew 0.4% to R554m.
The growing importance of e-commerce continues to warrant the
ongoing investment into this channel, signified by the group?s
launch of its new e-commerce platform at the start of the Period
and its recent acquisition of Yuppiechef. Group online sales
including this acquisition increased 51.8% (2.7% contribution to
total retail sales), against the high growth of 66.3% experienced
in the FY2021 Period. Some stabilisation challenges on the new e-
commerce platform were experienced and impacted performance,
excluding which the group?s online sales growth would have been higher.
Total unit sales grew 1.2% and group retail selling price inflation
of 4.6% (below CPI) was carefully managed in order to maintain the group?s leading value positioning.
The group?s GP margin expanded 60 basis points (margin maintained
when including lower margin acquisitions) over the Period. The
group?s strong value offering and high customer demand for the
?wanted item? enabled management to preserve margins by maintaining low markdown levels over the period.
The store footprint increased by 45 stores (by 60 including new
stores from acquisitions) to 1 702 from its half year ended 2
October 2021. Trading space increased 2.1% (8.9% including
acquisitions) on a weighted average basis and 3.7% on a closing
basis (13.7% including acquisitions). To date, 96 of the 111 looted
stores (including acquisitions) from the July 2021 civil unrest
have been re-opened and the balance of stores are expected to re- open during the remainder of FY2022 and FY2O23.
Due to the uncertain economic conditions consumers faced during
the FY2021 Period, cash transactions were preferred over credit by
customers, who were aided by stimulus provided by government and
private sector support initiatives. Against this high base, cash
sales during the Period grew 4.6% (including acquisitions 17.9%)
and constituted 87.1% (FY2021 Period: 86.4%) of total retail sales.
Credit sales showed a resurgence, increasing 10.6%, albeit off a
weak base as the FY2021 Period was impacted by consumer?s subdued
credit appetite as well as fewer shoppers in stores due to COVID-
19. Group credit sales for the Period were 1.5% higher than pre
COVID-19 levels and constituted 12.9% of total sales. Credit
applications for new accounts were 31.9% higher than the FY2021
Period, however the approval rate decreased 210 basis points as
the group continues to enforce its strict credit granting criteria.
The apparel segment (retail sales contribution: 74.5%) grew 6.4%
over the FY2021 Period. Mr Price Apparel, the group?s largest
division, continued its sales growth momentum which was delivered
against a market leading performance in the FY2021 period. The
division pleasingly gained market share in several of its newly
launched categories. Miladys continued its resurgence and has now
gained market share in 7 of the last 8 months according to RLC
data. Mr Price Sport achieved pre COVID-19 sales levels despite
the ongoing challenges with sport participation across schools and sports clubs.
The home segment (retail sales contribution: 22.6%) grew sales
0.7% against a double-digit base; 11.3% over the 2-year period.
The high demand for homeware merchandise experienced through the
FY2021 Period, benefitted both home divisions, bolstering the
group?s position as the homeware market share leader in South Africa.
Cellular handsets and accessories (retail sales contribution:
2.9%), available in 375 stores across the group, grew sales 18.7%
over the period at a maintained GP% margin. Double digit comparable
sales and high accessory attachment rates supported further market
share gains according to Growth from Knowledge (GfK).
The group is pleased with the performance of its two recent
acquisitions. Power Fashion?s (effective 1 April 2021) performance
continues to improve since the disruption of the civil unrest in
July 2021, gaining market share in October and November 2021
despite trading with the highest number of unopened looted stores
in its store base. The market share level recorded in November
2021 was the second highest in the division?s history. Yuppiechef
(effective 1 August 2021) continues to grow in line with
expectations and both acquisitions hold exciting prospects for the future.
Other income grew 96.2% to R431m over the Period. The high rate of
growth is mainly attributed to the one-off receipt of income from
insurance claims against the looted stores from the July 2021 riots
of R204m. Excluding the income from insurance claims, other income
increased 3.2%, supported by higher debtors? interest and fees
from the groups debtors? book, which experienced positive growth
due to higher credit sales and the repo rate increase of 25 basis
points. The debtors? book is healthy, signaled by lower net bad
debt due to reduced write-offs and higher recoveries. Collections
as a percentage of the debtors? book increased compared to the
FY2021 Period, resulting in an improved ageing profile.
Closing inventory levels at the end of the quarter (including new
categories and acquisitions), reduced significantly from the start
of the Period, in accordance with the group?s previously
communicated plan to reduce inventory growth to single digit levels by the end of FY2022. OUTLOOK
The fourth wave of COVID-19 in South Africa proved to be shorter
and less severe than originally anticipated. The increased
economic activity and consumer spending that occurred after the
lifting of restrictions was encouraging. The group is confident
that its unique fashion-value positioning places it in a strong position to grow ahead of the market.
Shipping container availability, which materially impacted global
supply chains in 2021 has significantly improved, lowering the
risk of inventory shortages and delays. Shipping freight rates
continue to be volatile and remain at elevated levels. The group
is confident that its hedging policies ensure that it is adequately
covered at highly competitive rates for the 2022 calendar year.
The short-term improvements in the trading environment are
encouraging. However, the group anticipates further uncertainty
for the foreseeable future. Rising input costs and exchange rates
are expected to lead to higher merchandise inflation in the new
financial year. Focus remains on strong merchandise execution to
continue growing the core business and ensuring its investments into growth deliver to expectations.
Management is proud of the way in which the group?s people, proven
processes and partnership-based relationships have supported its
purpose of being ?Your Value Champion?. The group acknowledges the
effort of all its associates over this extremely busy and crucial
retail period. In particular its frontline store and supply chain
staff whose dedication to making the customer shopping experience
a safe and satisfying one is paramount. The group?s values of
passion, value and partnership are at the centre of everything it
does and these attributes continued to be lived out over the critical festive trading period.
The above-mentioned figures and any information contained herein
do not constitute an earnings forecast or estimate and have not
been reviewed and reported on by the Company?s external auditors. Durban 21 January 2022 JSE Equity Sponsor and Corporate Broker Investec Bank Limited Date: 21-01-2022 07:05:00
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