Disposable fashion wins

Johannesburg - Consumers' search for value has been a trump card for retailers during the key festive season, with a sales update from clothing and homeware retailer Mr Price confirming this.

The company's 21.4% increase in sales volume in December was evidence that its "disposable fashion" and low-price strategy is paying off at a time when South Africans are finding themselves strapped for cash.

Mr Price on Wednesday reported a 20.3% increase in sales during the third quarter to end-December. Comparable sales, which include sales of expanded and relocated stores in like-for-like locations, grew by 15.3%

"Sales were strong in the apparel division. South Africans are looking for value and Mr Price is attracting more and more shoppers who might not be dead-set on quality but want fast, and more importantly cheap, interpretations of big fashion trends," says Quinton Ivan.

Ivan, a portfolio manager at Coronation Fund Managers, was impressed by the group's trading update. "This stock is a 'buy' for me. It's very attractive," he said.

Mr Price's apparel division includes Mr Price, Mr Price Sport and Miladys.

Ivan's views are echoed by Jeanine van Zyl, an equity analyst at Old Mutual Investment Group SA. "This is an excellent company, trading at its peak," she said.

Discretionary spending is likely to increase if interest rates in SA decline further in 2009.

Among those poised to profit are Mr Price and Truworths. Truworths doesn't have Mr Price's low-pricing advantages but benefits from good judgement on stocking the kind of clothing South Africans want to buy, according to Ivan.

Foschini goes the conservative route

Foschini is expected to report on its festive season sales by the end of the week, but the numbers are unlikely to be received as well.

"Foschini's figures won't be nearly as good as what we saw out of Mr Price today," says Van Zyl.

"We may see a small improvement in sales."

Ivan expects to see top-line sales growth increasing to around 7%.

The flagship Foschini brand, which makes up for about 40% of the group's total turnover, struggled with internal problems in 2008.

"Supply chain issues in the core Foschini division resulted in the stores being under-stocked and certain misjudged fashion choices were not well received by the public," says Ivan.

It looks as though Foschini opted to under-stock stores during the Christmas period on fears that cash-strapped South Africans would stay away from shopping malls.

"This conservative decision was probably sensible on their part," says Van Zyl. "They have made mistakes with their merchandising choices in the past. So, it's probably better that they won't be left with lots of unsold stock."

- Fin24.com