Johannesburg – After embarking on a strategy to regain market share, Mr Price [JSE:MRP] is now among the best competitors in the retail market, according to an analyst.
Speaking to Fin24 by phone on Friday, independent analyst Syd Vianello explained that the latest trading update by the retailer showed its strategy has paid off.
In May the group reported that its earnings took a knock due to the challenging environment. But the trading update to August 26 showed that South African sales of MRP Apparel, which includes Milady’s and MRP Sport, grew by 8.7%. This compares favourably to the 4.8% growth in the textiles, clothing, footwear and leather goods reported by Statistics South Africa.
The group expects the Milady’s division, which grew 13.5%, and MRP, which grew 9%, to contribute positively to the gross profit margin for its half-year earnings.
Sales for MRP Sport grew by 2.4% only while sales for the homeware division fell by 1%. However, the group believes its value proposition for these divisions is still strong.
For the first four months of the group’s financial year, sales grew 6.2% to R6.5bn. Retail sales for the three-week period from August 6 to 26 2017, which was not included in the trading update, were up 6.8%.
“These numbers are showing that the momentum is certainly in line with the best of their competitors. They are among the best in the industry,” said Vianello.
When it comes to apparel retailers, it’s about product, price and passion, he said. “Clearly they've got the product right. People aren’t going to buy stuff they don’t like. They liked what they saw, the pricing was good and they were prepared to buy it.”
But the apparel business is also fickle, and if Mr Price’s merchandise for the summer season is below par then people won’t buy. “At this stage they got it right.”
Given economic conditions, people often trade down and look for value. “Mr Price, being a value retailer, is right there to satisfy their needs,” said Vianello.
“One of the reasons top-end retailers are struggling is probably because of price. In a tough economic situation, people can’t afford the pricing. They trade down to retailers who have got the price.”
Vianello pointed out that H&M, which has similar price points to Mr Price, is also doing better. Ahead of the festive season, Vianello said the environment will be tough for retailers as there is less money in the market.
“Some retailers will do better than others. Those in the value end of the market will probably do better than those who aren’t in the value end.”
Mr Price shares were trading 3.43% up at R187.53 around 14:00 on the JSE.
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