Mr Price earnings up due to successful retail formula

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[DATA MPC:MR PRICE GROUP LTD.], the country’s third largest clothes retailer posted its financial results for the 26 weeks ended 28 September 2013.

The company believes that their fashion-value retailing formula based on a cash model resulted in strong sales growth, operating profit, headline earnings and dividend per share all increasing by more than 20 per cent.

“We focused on avoiding chasing credit sales to drive top-line growth and are pleased that cash sales growth of 15.1 per cent exceeded credit sales growth of 11.6 per cent. We have been loyal to our cash model and 79.2 per cent of total sales were for cash,” said Stuart Bird, chief executive officer of Mr Price Group in a statement released on Tuesday.

Diluted headline earnings per share rose from 232.5 cents per share in 2012 to 283.6 cents this year while an interim dividend increase of 26.3 per cent from 133 cents per share to 168 cents per share was declared.

The group’s total revenue was also up 14.8 per cent to 7.2 billion rand while cash sales rose 15.1 per cent, driving retail sales to increase by 14.6 per cent to 6.9 billion rand.

Bird also stated that their expansion plans were well under way after opening 12 stores in the first six months with an additional 43 stores to open in the second half of the year.

The group also opened two new stores in Nigeria bringing the total to four.  

“We no longer view Nigeria and Ghana as test markets. Although a more efficient supply chain will in time enable us to lower selling prices and be very competitive in those markets, they are currently performing well and confirm their potential,” said Bird.

He added that their online sales platform will also provide them with a strong growth opportunity globally and will allow a cost effective means of testing foreign markets.  

The South African retail environment however remains challenging due to low consumer and business confidence and tight fiscal policy government not supporting consumer growth.

On the other hand, the company believes that the retail environment will continue to be positively impacted by  an emerging middle class and an increasing household consumption, which is expected to increase between three and four per cent over the next few years.

“In the short term there are significant headwinds facing consumers and in such tight economic conditions, consumers tend to shop for value. As a value retailer, the Group is well placed to attract more customers and history has proved that these customers are retained when trading conditions improve,” said Bird.

“There are many opportunities and challenges ahead and we have been working hard on building processes, systems and infrastructure that will form a solid foundation for our growth strategy. Our focus is on ensuring that we are clear about the new territories that we will enter and the trading formats which we will adopt, while ensuring that we continue to build momentum locally.”