DISAPPOINTING UPDATE FROM MR PRICE
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.