Johannesburg - Shares in value retailer Mr Price Group have risen 5% as the company reported a rise in sales, profits and market share, bucking the overall contraction in sales seen by the broader SA retail sector.
By 10:45, shares had jumped 5.1% to 2 389c against a 0.6% rise in the all-share index to 20 223.97 points.
Mr Price Group, whose brands include apparel retailers Mr Price, Miladys and Mr Price Sport, and homeware retailers Mr Price Home and Sheet Street, reported an 18.6% rise in retail sales to R3.9bn for the six months to end-September.
Same-store sales rose 8.9%, with average price inflation of 4% for the period.
Diluted headline earnings per share rose 11% to 86c.
Speaking at a presentation of the results, Mr Price Group CEO Alastair McArthur said earnings have risen at an average compounded annual growth rate of 28% over the past five years. "The challenge for us is to keep that rate in the second half of this year," he said.
Mr Price's announcement came ahead of Statistics SA's release of September retail sales data; economists had expected a fifth consecutive monthly fall in real sales of 3%, but sales fell by 5%.
Bad debts drop
Mr Price Group says 84.1% of its sales for the period were cash sales. While its debtors' book grew 12.4% to R610m and cash-strapped South African consumers are struggling to keep up with debt repayments, the percentage of bad debts, including debts recovered but excluding collection costs, has fallen to 7.1% of the book, or about R43m, from 8.1% a year ago.
The group made a lower provision for bad debt (8.4% compared with 8.9% in the previous year), although almost half of that provision, three percentage points, is for additional risk factors such as the state of the economy and amounts to an over-provision, said McArthur.
Mr Price gains market share
Sales at apparel chain Mr Price rose 20% to R2bn, with same-store sales up 15%. McArthur said statistics released by the Retailers' Liaison Committee show Mr Price's share of the market grew from 9.5% in September 2007 to 10.3% in August 2008. Sales per square metre also improved from 20 074 in 2007 to 22 415.
Mr Price Sport, launched in July 2006, is still not profitable, but will be as of next year, which should see an uptick in apparel retail margins, said McArthur.
Mr Price's express format chain now comprises 12 stores. McArthur said its return on capital employed is "already higher than planned", and that there is the potential for this smaller store format to expand to 100 stores.
Ladies' footwear, formalwear, accessories and sleepwear are growth areas the business has identified, with each experiencing more than 30% grown in 2008.
At home furnishings chains Mr Price Home and Sheet Street, sales rose 14% to R1.2bn, but same-store sales were flat.
McArthur said the group's strategy of opening larger stores has paid off, with its 29 super and ultra stores of between 1 500m² and 6 000m² generating 47% of sales. "At these stores, we're banking margin rands at a quicker rate."
Sales at smaller stores near super and ultra Mr Price Home stores have been cannibalised (negatively affected); four of these smaller stores have been closed, with a further eight closures on the cards. Space grew by 26%, "the last time you will see a figure like this", said McArthur, as the company has completed its rollout of large format stores.
Growth outside SA
The group opened a total of eight stores abroad: Mr Price and Mr Price home stores in Tanzania and Mauritius, a Mr Price in Kenya, and three Mr Price Home stores in Saudi Arabia, taking the total number of stores outside SA to 16.
McArthur said there could be as many as 80 stores in Africa in five years' time. "The challenge is getting supply chain logistics to support this rollout right."
There has been interest from Australia, New Zealand and India in the group's brands, but it was not willing to expand "until the logistics pipeline was worked out".
- Fin24.com