Solid Capital Allocation For Mr Price

One of South Africa’s best-run apparel retailers sets out its strategy for the coming years.

- Zinhle Mayekiso

Mr Price recently released solid financial results for the 53 weeks ended 3 April 2021. These results beat analyst expectations across most metrics. The company’s operational performance was driven by market share gains and stronger second-half performance. We think the positive share price reaction was driven by the solid results and their newly outlined strategy during its earnings call, which was positively received by the market.

Mr Price intends being the best value retailer in Africa across all retail segments by way of market cap valuation, and identified six strategic pillars to achieve this. Mr Price also plans to improve its earnings growth significantly over the next few years. The company said that it will be looking to pursue growth opportunities in the aspirational value segment in SA across its existing retail sectors. The share is trading at a 12-month forward price-to-earnings multiple (P/E) of 19.2 times, slightly higher than its historical average of 17.9 times (see graph).

Segmental Overview

Retail sales at the Mr Price division declined by 3.4% year on year but saw strong growth of 8.4% in the second half of the financial year. The second-half performance was driven by market share gains and sales at higher margins. Mr Price Sport saw sales decline by 10% during the period, driven by negative Covid-19 effects on the back of sports, gym and school closures.