Finweek English Edition - - SIMON SAYS -

Start­ing with trad­ing up­dates, Mr Price* is­sued what the mar­ket con­sid­ered a shocker of an up­date that sent the stock down 13% at one stage on the day. To­tal group sales growth was 9% with same­store growth only 4.6%. This is not out of line with other re­tail­ers, but for the high­fly­ing Mr Price it was sim­ply not good enough. The state­ment did men­tion a few is­sues such as the fact that Easter was early this year and that sales over this time were in­cluded in the pre­vi­ous pe­riod. The re­tailer also made some bad fash­ion calls. That all said, when the share price peaked in April at over R280, the price-to-earn­ings ra­tio (P/E) was around 33 times. This re­minds me of Shoprite*, which had a sim­i­lar P/E when it peaked at around R220 in early 2013. The Shoprite price has been weak ever since, while earn­ings slowly catch up to that el­e­vated P/E. The same fate will likely be­fall Mr Price un­less it can get growth roar­ing again.

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