Mr Price gears up to turn around
WHEN Stuart Bird took over as CEO eight years ago, the Mr Price Group’s share price had gained over 41% in the preceding year.
But since the share price hit a record high in April last year it has shed about 24%.
Bird now has the arduous task of turning the business around.
Mr Price released a set of dismal results this week — reporting the group’s first earnings decrease in 16 years. For the year ended April 1, diluted headline earnings per share fell 10.4% from the previous year, to 887.9c.
With retail sales in comparable stores dropping 3.6.% to R18.6-billion, total revenue did not even register a 1% increase, coming in just 0.7% higher at R19.8-billion.
The retailer has had to deal with increased competition from international retailers and a difficult operating environment.
Speaking at the group’s results presentation in Durban this week, Bird said: “We do think that we are past the worst of it.
“We see the environment has continued to be constrained and in this kind of environment your opportunities are constrained to marketshare growth.”
He said the weak environment placed greater emphasis on costs as well as efficiency.
But despite constraints in the environment, the group had the ability to increase market share in all its businesses, he said
Atiyyah Vawda, a retail analyst at Avior Capital Markets, which has a neutral rating on the stock, said: “The reason we had them on neutral is because we saw that they do have the potential to turn around, but it could take some time.”
Vawda said Mr Price had benefited from a weak operating environment and as a discount retailer might benefit from the weaker base, as consumers sought products at cheaper prices.
“We’ll have to see what is sustainable,” said Vawda.
For the period, MRP apparel sales were R10.9-billion, down 1.7% , while MRP Sports sales increased 7.7% to R1.4-billion. Miladys sales declined 5.3% to R1.3-billion. Mr Price’s cash sales for the year made up 83.3% of total sales. Total credit sales of which MRP accounted for 55%, were 3.1% lower.
Ashraf Mohamed, chief investment officer at JM Busha Investment Group, said: “They acknowledge that they have been taken by their foreign competitors and they changed their strategy and their approach, and they’ve started to see some benefits from that in terms of where they see growth coming from in the future.”
Mohamed said Mr Price was trying to position itself to make its brand more “relevant” in the market.
Vawda said: “They are able to achieve [a turnaround] provided that they are able to deliver better products.
“The problem with Mr Price is mainly from the retail offering or issues with their product type.”
Vawda said the group was coming off a low base compared to last year, which was affected by a warmer-thanusual winter.
In the first eight weeks of this year, the group managed to drive stronger sales growth.
But as Mr Price Group focuses on regaining its strong position in the market, it also has to face the National Credit Regulator.
This week, the regulator found that Mr Price Group had unlawfully charged consumers a club fee on credit agreements with Miladys customers.
The retailer said it would oppose “the referral to the National Consumer Tribunal instituted by the NCR, as we do not agree with the view held by the NCR”.
Last month, the credit regulator found Edcon had contravened credit regulations on its Edgars Club card.
Mohamed said the difficulty would come in turning the Mr Price business around.
But he added: “The business I’m more worried about on the retail business side is Truworths. They are going nowhere.”
On the question of whether the retailer could return to its former glory, Mohamed said: “It’s going to be hard for most retailers to return to their former glory, given the current environment.”
HOW THEY ROLL: A Mr Price store in Rosebank , Johannesburg