Dire economy boosts Mr Price

Johannesburg - Value retailer Mr Price owed its good performance to deteriorating economic conditions, said analysts.

The group posted full-year results to end-March on Wednesday, reporting a profit increase of 16% to R827m; headline earnings per share went up by 16% to 245c. Comparable sales grew by 19.3% to R8.6bn.

The larger apparel chains - Mr Price, Miladys and Mr Price Sport - had a particularly good year, growing sales by 22.7% to R5.9bn, with comparable sales up 16.2%. Mr Price Home and Sheet Street were the only outlets to show some strain, with sales up by a modest 12%.

However, Mr Price was the star performer, growing sales by 24% with comparable sales 20% higher. In comparison, the Retail Liaison Committee reported a 9.7% growth in average spending on clothing and footwear at retailers during the same period.

Old Mutual Investment Group analyst Jeanine van Zyl said the group is doing well because the economy is in dire straits. On Tuesday, Stats SA reported a 6.4% decline in gross domestic product on a quarterly basis in the first three months of 2009.

"Being a value retailer, Mr Price performs very well when consumers are stretched and looking for discounts," she said. "While it is cheap, it provides a value proposition the consumer wants."

Coronation Fund Managers' Alistair Lea concurred, saying cash-strapped consumers don't buy bigger ticket items. "They seek good value and fashion which Mr Price offers," he said, adding that the Mr Price brand has become a staple purchase for the average SA consumer.

"Interest rate cuts will start to take effect from the second half of the year, which will make Mr Price continue growing its earnings," said Lea.

Van Zyl said 2009 will be tough for the consumer, but her expectations for Mr Price are positive. "We will again see a strong result from Mr Price; the company is well placed for a recession," she said.

Mr Price shares were trading 1.89% up at 2 700c on Wednesday afternoon.

- Fin24.com