Mr Price Group Limited
(Registration number 1933/004418/06)
Incorporated in the Republic of South Africa
LEI number: 378900D3417C35C5D733
JSE and A2X share code: MRP
("group" or "company")
TRADING UPDATE FOR THE 18 WEEKS ENDED 7 AUGUST 2021
During the first 18 weeks from 4 April 2021 to 7 August 2021
(the ?Period?) of the financial year ending 2 April 2022
(?FY2022?), the group recorded growth in retail sales and other
income (?RSOI?) of 48.8% to R8.6bn. This performance was
supported by the inclusion of the recently acquired Power
Fashion (?PF?), effective 1 April 2021, and Yuppiechef (?YC?),
effective 1 August 2021. Excluding these acquisitions, RSOI grew
38.6% to R8.0bn.
The financial performance commentary below is against the first
18 weeks of financial year 2021 (29 March 2020 to 3 April 2021,
referred to as ?FY2021 Period?) and to provide a more relevant
comparison due to the significant effects of the COVID-19
lockdown restrictions enforced during FY2021 (all stores closed
in April 2020), commentary is supplemented with comparison
against the same period in financial year 2020 (31 March 2019
to 28 March 2020, referred to as ?FY2020 Period?).
The group gained 250 basis points of market share and excluding
acquisitions gained 90 basis points according to the Retailers?
Liaison Committee (RLC)from April 2021 to June 2021 (the latest
period for which data is available). This is a continuation from
the 150 basis points of market share gained in the twelve months
to the end of March 2021. The group experienced several external
disruptions during the Period which impeded performance.
However, market share gains were achieved despite these
challenges, highlighting the resilience of the group?s fashion-
value business model.
The recovery in the consumer environment was negatively affected
by extended COVID-19 lockdowns which moved from less restrictive
level 2 and fluctuated between more restrictive adjusted levels
3 and 4 from 15 June 2021 to 26 July 2021. The country is
currently under adjusted level 3 lockdown restrictions.
Significant disruption was also caused to trade and supply chain
operations by the civil unrest during the month of July in
KwaZulu-Natal and parts of Gauteng, two of the country?s
prominent provinces (Refer SENS 14 July 2021 and 21 July 2021).
Additionally, the group?s primary port of entry, Durban, had its
operations disrupted intermittently by the civil unrest and an
unprecedented cyber-attack. All these factors have weighed
heavily on business and consumer confidence, population mobility
and hampered economic activity during the Period.
Retail sales for the group?s corporate-owned stores compared to
the FY2021 Period and FY2020 Period was as follows:
Total sales growth - 18 weeks
FY22 vs FY21 FY22 VS FY20
Apparel segment 56.2% 17.0%
Apparel segment excl PF 41.1% 5.7%
Home segment 42.7% 14.0%
Home segment excl YC 42.2% 13.6%
Group* 50.9% 16.9%
Group* excl PF and YC 40.1% 8.6%
*Includes Cellular (handsets & accessories)
The commentary below relating to key group performance metrics
South African retail sales grew 40.7% to R7.7bn over the FY2021
Period (+8.9% on FY2020 Period). The two-year growth of 8.9%
includes the effects of the COVID-19 level 5 lockdown in April
2020, subdued discretionary sales in the retail sector in June
2021, high levels of pent-up demand in the base and the store
closures due to civil unrest in July 2021.
Store sales were up 40.5% over the FY2021 Period (+7.3% on FY2020
Period), a strong performance considering that at one stage 539
stores were closed during the week of civil unrest and 104 stores
remained closed and did not trade for the last 3 weeks of the
Period, due to either being looted or partially damaged to
varying degrees. Non-South African corporate-owned stores sales
grew 33.2% to R546m over the FY2021 Period (+4.6% on FY2020
The group?s online channel continues to perform strongly,
increasing sales 46.4% over the FY2021 Period (+103.2% on FY2020
Period), and contributing 2.9% to sales (1.6% in FY2020 Period).
Unit sales grew 34.4% over the FY2021 Period (-0.9% on FY2020
Period) and inflation was up 5.2% over the FY2021 Period (+10.1%
on FY2020 Period).
The group?s diverse store footprint expanded by 211 stores from
its financial year ending 3 April 2021(acquisitions: 181; new
stores: 30) to total 1 629, offering accessible and convenient
shopping locations for its customers. Trading space increased
5.2% (1.6% excluding acquisitions) over the FY2021 Period on a
weighted average basis.
The prevailing consumer environment continues to see customers
favouring cash transactions, and as a result the group increased
cash sales 39.7% over the FY2021 Period (+11.5% on FY2020
Period), constituting 84.9% (82.7% in FY2020 Period) of total
sales. The group has seen an improvement in credit sales, which
grew 42.4% over the FY2021 Period (-5.3% on FY2020 Period),
driven by an increase in new and existing account sales. Credit
sales are approaching pre COVID-19 levels, despite a marginally
lower account base due to consolidation during the FY2021
Period. The group continues to be prudent in its credit granting
criteria due to the volatility of the consumer environment.
In the apparel segment, the group?s largest division, Mr Price
Apparel has gained market share for 15 consecutive months,
highlighting its strong customer value proposition. This has
been achieved through its differentiated fashion merchandise and
an intentional strategy to enhance the value offered to its
customers. Miladys, which competes in a niche segment of the
apparel market, has made good progress in countering the
challenging consumer trends it has faced during the COVID-19
pandemic. It has successfully launched an online platform and
traded into higher demand categories, resulting in market share
gains in all 3 months during the Period. The recently acquired
Power Fashion business, which competes in the lower-income
segment of the market, also gained market share during the
Period. Mr Price Sport performed strongly, albeit off a lower
base than the rest of the group, but continues to face trading
challenges due to the ongoing COVID-19 restrictions which have
negatively affected schools, sports clubs and gyms.
Due to the extended COVID-19 lockdowns, the homeware trend has
continued, and the home segment performed strongly. Mr Price
Home and Sheet Street collectively gained 150 basis points of
market share during the period.
Cellular handsets and accessories increased sales 11.2% over the
FY2021 Period (41.8% on FY2020 Period). Products are available
in 371 stores and online, supporting further market share gains
during the period according to Growth from Knowledge.
Other income grew 4.3% to R291m over the FY2021 Period (-10.5%
on FY2020 Period). Debtors? interest and fees were adversely
affected by a reduced debtors? book and lower repo rates.
The group previously communicated on 14 and 21 July 2021 that
the civil unrest that took place in KwaZulu-Natal and in parts
of Gauteng resulted in 111 stores closing.
The group continues its assessment of the damage but is confident
that it is adequately covered for its incurred losses through
its riot wrap cover (business interruption covering lost gross
profit from day 15 up to 12 months) and SASRIA insurance cover
(physical damage to fixed assets and stock loss).
The fully quantified insurance claims and GP margin impact are
scheduled to be communicated at the interim results presentation
in November. Shareholders are advised that accounting for the
losses may take place in a different reporting period than when
the insurance recovery is recorded.
We are proud of our associates and partners for their efforts
in ensuring that the affected stores become operational as soon
as possible. Of the 111 stores, the group estimates that
approximately 75% of these will be re-opened by the end of
September 2021. An additional 10% of stores will re-open by the
end of FY2022 with the outstanding balance of stores expected
to re-open during FY2023.
The group anticipates the consumer environment to remain
constrained. The South African economy continues to feel the
impact of the ongoing COVID-19 restrictions, exacerbated further
by the slow pace of the vaccination roll-out. The recent civil
unrest has added strain to the country?s GDP growth recovery.
In this challenging environment consumers will become
increasingly value conscious. The group is confident that its
fashion-value merchandise offering is well positioned to build
on the market share gains from the last year. Its recent
acquisitions add further strength to its ability to increase its
share of wallet in its two primary segments.
International port congestion and global supply chain imbalances
are having a material impact on distribution operations and
costs, and on the economy as a whole. In line with the rest of
the sector, the group is experiencing the negative impact of
these disruptions and anticipates it to continue into the second
half of FY2022.
The group?s inventory position at the end of the period was
higher than planned due to the temporary store closures during
the week of civil unrest. In addition, the total apparel and
homeware market reported subdued sales growth in June 2021 (RLC
decreased 3.8%), a similar trend experienced by the group,
further compounding the stock position. The terminal winter
component of this inventory is not significant, and management
are focused on ensuring that the non-seasonal stock position
improves throughout the remainder of FY2022. Consumers remain
constrained and protecting them from inflation pressure is a
priority in ensuring that the group?s everyday low-price promise
The group anticipates that it will report a reduced GP margin
in H1 as a result of the following factors: inventory write-offs
due to the civil unrest (recoveries from insurance claims will
be accounted for under other sundry income); markdown levels
have been acceptable but are higher than the historically low
levels reported in the FY2021 Period; and the inclusion of
acquisitions which trade at lower margins than the group. The
non-recurring credits in the H1 expense base (rental relief and
government support initiatives) will impact expense growth and
management continues to apply its disciplined approach to cost
The group?s cash-based, omni-channel business model has proven
extremely resilient over the last 35 years. Despite the store
closures and fully funded acquisitions, the group?s cash balance
remains healthy at R4.2bn. Our associates have consistently and
proudly lived the group?s beliefs of passion, value and
partnership through the events over the last 18 months. We extend
our sincere gratitude to them for their commitment to the group
and to all stakeholders for their understanding and support.
The forecast financial information on which this trading update
is based has not been reviewed and reported on by the company?s
20 August 2021
JSE Equity Sponsor and Corporate Broker
Investec Bank Limited
Date: 20-08-2021 07:05:00
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