Mr Price Group's share price surges as half-year sales exceed market expectations

Amidst a challenging retail landscape, Mr Price Group has reported strong half-year results that have significantly outperformed the market and its share price surged over 6.7% on Thursday.

The value retailer's sales for the 26 weeks ending September 27 saw total revenue rise by 5.4%, reaching R18.6 billion. Retail sales growth of 5.5% surpassed the market's growth of 5.3%, as highlighted in statements from the company's directors.

As the country’s economic pressures continue to shape consumer behaviour, CEO Mark Blair on Thursday expressed pride in the company’s ability to expand its gross profit margin by 30 basis points to 40%.

“Our gross margin increased despite a very challenging retail environment. Our value-focused business model enabled us to effectively manage overheads and ensure we consistently deliver positive earnings growth and returns to shareholders,” said Blair.

The retail sector's promotional nature did not deter Mr Price Group’s operational success. The operating margin improved by 10 basis points to 11.5%, attributed to strict cost control measures that successfully contained total expense growth at 5.6% despite expanding trading space.

However, the directors cautioned that while the earnings growth is commendable, it reflects a consumer environment that remains financially strained.

“The prolonged period of negative real wage growth through 2022 and 2023 has had a lasting impact on household disposable income, resulting in weak consumer expenditure,” Blair said, emphasising the ongoing challenges of consumer sentiment amidst lower interest rates and inflation.

The company reported diluted headline earnings per share growth of 6.4%, reaching 497.9 cents, and declared an interim dividend of 323.2 cents per share, up 6.5%, maintaining a pay-out ratio of 63%.

In the apparel segment, retail sales increased by 5.3% to R14bn, outpacing the comparable market's growth of 4.7%. Notable contributors to this growth were Miladys and Mr Price Sport, while Power Fashion achieved its 14th consecutive quarter of market share gains.

In contrast, the Homeware segment also saw a 5.1% increase in retail sales, demonstrating a resilient performance against a backdrop of intense promotions across the market.

The group opened 91 new stores in this period, bringing its total to 3 100, and saw total unit sales increase by 2.5%. Despite some sales growth challenges, the first quarter experienced strong figures due to shifting holiday periods, while the second quarter was marked by improving sales momentum, with retail sales up 3.3% against a firm base of 12.3%.

Looking forward, Blair noted the fragile outlook for consumers, identifying GDP growth improvements but warning that they are not sufficient to create a robust business environment. “Significant improvements in the operational capacity of the Durban port have positively impacted stock flow and inventory management ahead of key trading months,” he said.

He remains optimistic about the group's diversified brand portfolio, which he believes is well-positioned to meet evolving consumer demands.

Amidst all challenges, Mr Price Group continues to focus on its strategic vision, confident in its brands and their appeal to value-seeking customers. “Our commitment to execution and providing value to all our stakeholders remains our priority,” Blair concluded, reinforcing the company’s strategy to navigate the complexities of today’s retail landscape.

BUSINESS REPORT