Mr Price Group’s share led a rally in many retail sector stocks on the JSE yesterday, surging 7.1% to R292.30 per share just a week before Black Friday and on the day of another interest rate cut, after the value clothing and homeware group said there were signs that South Africa was finally entering an upward economic cycle.
“The increasing sales momentum in the second quarter and the strong start in the second half with sales up 12.4% in the first 7 weeks is encouraging,” CEO Mark Blair said in a statement.
Consumer spending behaviour has been crimped in recent times by high interest rates, inflation, unemployment and low household income.
The first two weeks of November started strongly with sales increasing 14.7%. All trading segments delivered double-digit growth in the seven-week period to 16 November and recorded improvements in gross profit margin, he said.
Early signs of a recovery in the retail environment were seen with improving sales growth in all 3 months of the second quarter. For the 26 weeks to September 29 total revenue increased by 5.2% to R17.6bn.
Other shares that gained strongly on the JSE yesterday morning were The Foschini Group, which increased 4.1% to R174.12, Pepkor’s share price was up 3.9% to R24.48, Truworths’ share price gained 3.77% to R108.44, while the share price of grocery franchise group Spar increased 3.45% to R134.99.
Market share growth by Mr Price was evident from the 5.1% growth in retail sales that outperformed the comparable market’s sales growth of 2.2%. These gains came with a gross margin expansion of 110 basis points to 39.7%.
Basic and headline earnings per share of 481.5 cents and 481.8 cents were up 7.3% and 7.1% respectively. Diluted headline earnings a share increased 6.5% to 468 cents. An interim dividend was raised 7.1% to 303.6 cents a share and a pay-out ratio of 63% was maintained.
Blair said while there were positive economic factors such as no load shedding, increased political stability and the appreciation of the rand, the earnings performance for the six months still reflected a constrained consumer environment.
He said the group gained market share in five out of six months, only losing market share in July where there were traditionally many promotions as competitor winter merchandise was discounted. He said the group had now gained market share for four consecutive months.
“The financial year started with a very challenging first quarter, impacted by a contraction in the economy caused by uncertainty prior to the national elections and the late onset of winter,” Blair said.
Group store sales increased 5.1% and online sales 4.0%. The investment in its omni-channel offering, aligned with customers’ preference for in-store shopping, saw total unit sales increase 2% and retail selling price inflation was contained at 2.7%.
The store footprint at the end of the period closed at 2 958 stores, increasing by 92 new stores across the group's 15 trading chains.
Retail sales for the Apparel segment increased 4.9% to R13.3bn, outperforming the comparable market's sales growth of 1.7%.
The Homeware segment’s retail sales increased 4.3% to R3.0bn, and sales growth accelerated in the second quarter. Comparable sales turned positive during the period, increasing from -0.6% to 0.8%.
The Telecoms segment delivered double-digit retail sales growth, up 13.1% to R603m.
The Financial Services segment's revenue increased 6.4% to R472m. Debtors' interest and fees were up 6.0% and Mr Price Insurance increased 7.3%.
Capital expenditure of R383m was primarily allocated towards new stores and revamps - the annual capex forecast of about R1bn and 200 stores remains in place.
The first two weeks of November started strongly with sales increasing 14.7%. All trading segments delivered double-digit growth in the seven-week period to 16 November and recorded improvements in gross profit margin.
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