Johannesburg - Retailer Mr Price Group delivered an increase in interim earnings helped by its “unique” value proposition mixing fashion and low prices, chief financial officer Mark Blair said yesterday.
Despite the weak consumer environment, the clothing and homeware retailer lifted retail sales by 14.6 percent to R6.9 billion in the 26 weeks to September 28. Its share price climbed 1.83 percent to close at R149.89 on the JSE yesterday.
The share, which hit an all-time high late last month, has gained 6.52 percent this year compared with the 5.79 percent fall in the general retailers index, which includes rivals Woolworths and Truworths.
Blair said in general, value retailers should perform better than other fashion retailers in tough economic environments.
“It’s not just low prices… it’s the unique mix of fashion and low prices that makes Mr Price attractive,” he said.
Sector competitors such as Truworths and Foschini have suffered from their exposure to credit sales due to the pullback in unsecured lending.
Blair said it was a key strategy to reduce the group’s exposure to credit over the past two years even as many retailers were increasing their exposure at the end of last year.
Credit sales increased by 11.6 percent in the 26-week period compared with a 26.1 percent rise in the prior year.
Cash sales grew by 15.1 percent and accounted for 79.2 percent of all sales.
Headline earnings a share grew 20.4 percent to R3.05.
The group plans to open 43 stores in the second half of its year. Two new stores were opened in Nigeria in the period, bringing the total to four.
The group increased its sales in its African markets outside South Africa by 42 percent compared with last year.
Blair said although the focus was on Ghana and Nigeria, the whole region was delivering pleasing results. “We no longer consider those markets as ‘test markets’,” he said.
Woolworths recently pulled out of the Nigerian market, saying its stores were not performing well.
Blair said the lack of infrastructure and high rental rates in Nigeria would discourage retailers from entering the market in that country.
“Its not an easy market. In South Africa we benefited from the emerging middle class and we had the expectation of it playing out in other African markets but there are huge challenges,” he said.
Noah Capital Markets analyst Roger Tejwani said the company was in a bit of a “sweet spot” as it reduced its exposure to credit sales and customers were attracted by Mr Price’ value offering.
He said Mr Price was benefiting from “trading down” where customers who usually spent more on clothes were feeling the pinch and moved to lower-priced retailers while it also benefited from lower-end consumers moving up to Mr Price as they aspired to wear the brand. - Business Report