Show­ing its met­tle

Financial Mail - - DIAMONDS & DOGS -

No­body would ex­pect a re­tailer to be shoot­ing the lights out in the cur­rent en­vi­ron­ment, but Mr Price has put in a steady per­for­mance un­der what it de­scribes as con­di­tions of un­prece­dented op­er­a­tional dis­rup­tion and sig­nif­i­cant uncer­tainty.

Sales un­avoid­ably fell off a cliff with all its stores closed in April. But since lock­down re­stric­tions have been eased Mr Price has seen high lev­els of pent-up de­mand un­leashed as the cus­tomers have put their backs into spark­ing an eco­nomic re­bound.

Mr Price points to a num­ber of short-term fac­tors that have driven this spike, and cau­tions that neg­a­tive GDP and re­tail sales growth out­looks, as well as ris­ing un­em­ploy­ment, sug­gest that it is likely to be tem­po­rary. So it is keep­ing a close eye on its or­der book and stock lev­els.

The group’s on­line sales rose by 90.1% in the pe­riod, while in the real world, smaller-for­mat stores out­per­formed ma­jor re­gional cen­tres as cus­tomers opted for con­ve­nience.

Now the key is to po­si­tion the group for the new en­vi­ron­ment. Mr Price has iden­ti­fied R300m of ex­pense re­duc­tion that can be im­ple­mented, but it is also look­ing at or­ganic growth and ac­qui­si­tions. It has an­nounced its plans for a sig­nif­i­cant cap­i­tal raise to give it the fire­power to re­spond quickly to op­por­tu­ni­ties that ar­rive, and it be­lieves that its cash-based, fash­ion-value model will go down well with con­sumers in a con­strained eco­nomic en­vi­ron­ment.

Tellingly, it sug­gests that a com­pany’s val­ues come through when trade is at its tough­est, and it seems to be up for the test.

Mr Price has plans for a sig­nif­i­cant cap­i­tal raise to give it the fire­power to re­spond to op­por­tu­ni­ties

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