Moving from mid cap to blue chip
Mr Price Group, with its wide array of offerings aimed at the middle LSMs, has been growing steadily, expanding its stores and adding to its footprint.
theMr Price Group is a self-titled “fashion value” retailer, offering apparel, homeware and sportswear predominantly to the South African retail market. The business consists of outlet brands MRP, Miladys, MRP Sport, MRP Home and Sheet Street. In terms of sales MRP accounts for 59% of the group’s total sales, MRP Home 19%, Sheet Street 8%, Miladys 8% and MRP Sport 6% thereof.
The group now boasts 1 200 stores across its divisions of which 108 (9%) are outside of South Africa.
The share is priced for growth on a current price-toearnings ratio (P/E) of 18.5 times (forward P/E 17). The company has returned a historical dividend yield of 3.35% and produced an astounding and market-leading return on equity (ROE) of 47% and return on assets (ROA) of 47.91%. A market capitalisation in excess of R50bn sees the company entrenched in blue-chip territory after having been a mid-cap counter for a number of years.
In what has been a difficult economic climate, the group has managed to post another robust set of full-year results for the period ending 31 March 2016. Mr Price has managed to increase floor space through net increase of 31 stores (45 opened, 14 closed) while expanding 26 of its existing stores. Revenue increased by 8% over the period while adjusted operating profit increased by 15% with a higher operating margin of 18.2%.
Headline earnings per share increased by 13% despite a relatively soft first half for 2016, and the company has managed to produce double-digit headline earnings growth every year for more than five years.
Cash sales increased over the period by 9%, while credit sales grew by a marginal 2% in the 2016 financial year. The soft credit sales growth can in part be attributed to the more stringent regulations employed in this department, but unlike most of the group’s competitors, Mr Price relies heavily on cash sales, which amount to around 80% of total sales.
Strong cash sales and cash flow generation remain among one of the reasons the Mr Price Group might be able to fair better than its credit retailing counterparts should a rising interest rate and more