Mr Price powers up with acquisition

0

The value retailer is also adding baby, school uniform and gifting lines to its offering.

Mr Price is buying fellow Durban-based clothing retailer Power Fashion as it expands its presence in the mid to lower end of the market.

Alongside its interim results yesterday, the value retailer said it would spend about 4% of its market capitalisation for Power Fashion, which has 170 stores across Southern Africa. It will pay the estimated R1.6 billion using its own cash and said it no longer planned to issue more shares after receiving approval for a rights issue from shareholders in June.

The value retailer also plans to launch new baby, school uniform and novelty and gifting ranges in the second half of its financial year under the mrpBaby, mrpSchoolwear and mrp&co categories. It said the move would provide additional growth in market share while extending its offering.

It attributed a stronger than expected performance for the six months to end-September to its cash-based, value business model but still reported a decline in earnings after losing out on sales of about R1.8 billion as a result of the hard lockdown in April. May’s sales were also affected by restrictions.

Total revenue from continuing operations fell 14% to R9.2 billion, with retail sales down almost 15% to R8.6 billion. Excluding April, retail sales were up 3.2%. Online sales for the period grew by 71.5% and now make up 2.5% of total sales. Basic earnings per share (EPS) fell 35% to 290.5c and headline EPS decreased by 25% to 328.5c.

Due to strong trading and high cash generation, cash and cash equivalents increased by 35% to R6.4 billion from March’s level and it ended September with no debt. After holding back on a final dividend last year, it said it would resume payouts, with a 210.1c payout for the six months. It also spent R165 million buying back its own shares over the period.

Sales for the first six weeks of its second half grew by double digits but were flat last week in the run up to Black Friday today, indicating the extreme volatility in consumer behaviour.

Management are cautious about the trading environment for the remainder of H2, due to high levels of uncertainty relating to volatile consumer spending patterns and a potential shift in shopping trends prior to Christmas,” Mr Price said. “The resilience of the group’s business model and its agile supply chain gives management comfort that it can balance the pursuit of additional market share while maintaining good fiscal discipline.”

Main Image: Killarney Mall

About Author

Leave A Reply