Mr Price Group Limited reports continued profit gains
MR PRICE GROUP LIMITED REPORTS CONTINUED PROFIT GAINS (26 weeks ended 26 September 2015)
[Durban, 18 November 2015] Mr Price today announced an increase in diluted headline earnings per share of 16.6% to 406.8c per share and interim dividend of 17.3% to 248.0 cents. The Company has achieved 10-year compound annual growth rates in interim HEPS of 23.5% and DPS of 26.1%.
Total revenue grew by 9.2% to R9.0 billion with retail sales increasing by 8.6% (comparable stores 4.0%) to R8.6 billion. Cash sales grew by 9.0%, ahead of credit sales of 6.7%, and constitute 81.4% of total sales. Retail selling price inflation was 7.1% and unit sales were up by 1.4% to 103.7 million. Weighted average trading space increased by 3.9%.
Sales growth continued to exceed the market, as reported by STATS SA, but was lower than in the same period in the previous year. “The economy is not in good shape and consumer confidence is understandably low, but our resilient fashion value model is built to withstand these conditions,” said CEO Stuart Bird. “We were trading off an exceptional performance in the corresponding period last year, especially in MRP apparel which represents 60% of our business. Last year, MRP apparel grew sales in the same period by 20% and comparable sales by 15%. In so doing it created an extremely high base to beat in a softer trading environment. The timing of the Easter school holidays and the late onset of Winter also did not aid the first half trading period. These factors largely resulted in the comparatively lower sales and unit growths.”
Sales in markets outside RSA grew by 9.8% to R756.6 million. Trading in Nigeria was initially strong, but slowed appreciably in the last two months due to recently imposed restrictions on imported merchandise. Although these are expected to be temporary, the Company’s interactions with regulators are focused on urgently re-enabling supply.
Other income, derived mainly from the financial services business, MRP Money, increased by 23.1% to R425 million. Insurance premium income rose by 16.1%, mobile (cellular) revenue by 55.9% and debtors’ interest and fees by 10.4%. The improvement in the net bad debt to book ratio to 5.2% significantly contributed to the division’s strong performance.
The Group gross profit margin of 40.1% was 1.3% lower than last year. The merchandise margin was impacted by exchange rates and, to a lesser extent, higher markdowns, and declined by 1.1% to 40.7% of retail sales. The cellular gross margin is initially low due to the upfront recognition of customer acquisition costs. Selling and administration expenses, which benefitted from a mark to market gain on open foreign exchange contracts, were generally well controlled and grew by 0.9%. Profit from operating activities increased by 16.3% and the operating margin improved from 15.1% to 16.1% of retail sales and other income (RSOI).
The Apparel chains increased RSOI by 10.1% to R6.6 billion. Operating profit rose by 13.4% to R1.2 billion and the operating margin increased from 17.5% to 18.0%. Sales in MRP apparel grew by 10.7% (comparable 5.1%) to R5.1 billion. Operating profit, impacted by a lower GP% and expenses growing at a slower rate than sales, was comfortably ahead of the prior year. MRP Sport grew sales by 12.6% (comparable 3.6%) to R559.9 million. An improved markdown performance and cost curtailment resulted in a meaningful increase in operating profit. Miladys, a higher margin credit business, had a disappointing performance, with sales decreasing by 0.8% (comparable -1.7%) to R654.3 million. Operating profit was down on the previous year despite continued tight cost control.
The Home chains increased RSOI by 6.6% to R2.3 billion. Operating profit rose by 23.5% to R333.8 million and the operating margin increased from 12.6% to 14.6%. Sales in MRP Home were up by 6.3% (comparable 3.4%) to R1.6 billion. An improved gross profit % and an increase in costs at well below the inflation rate enabled a significant gain in operating profit. Sheet Street grew sales by 5.2% (comparable 3.1%) to R653.8 million and operating profit was also well up on the prior year.
“We are satisfied with these results given the trading environment. Credit must go to our associates, who thrive in our culture of performance. It is a testament to them that five of our six trading divisions have produced double digit profit growth and the Group has increased operating profit in 29 consecutive reporting periods,” said Bird. “A special word of gratitude must go to the MRP apparel team and the support divisions, who have worked tirelessly on our international expansion programme. It was a proud moment for us all when the Group’s first two stores were opened in Melbourne, Australia in October and we will assess their performance in the new year prior to endorsing our roll-out strategy,” Bird added.
“However exciting international expansion is, we are focusing acutely on our established markets. The consumer environment could deteriorate further and we will still be up against a very challenging base in the second half of the year, particularly in Q3,” said Bird.
About Mr Price Group Limited
A high-growth, omni-channel, fashion value retailer:
Targeting younger customers in the mid to upper LSM categories
Retailing predominantly own branded merchandise
81% of sales are for cash
1 166 stores and online channels offering full product assortments
Market capitalisation of R48.9bn, ranked 37th on JSE
Included in MSCI Emerging Markets Index
Included in JSE Top 40 and Socially Responsible Investment Index
3rd in Financial Mail Top Companies 2015
17th in Business Times Top 100 Companies, highest ranked retailer
Mr Price Group Ltd
+27 31 310 8000