Mr Price Interims

Mr Price interim results show a tough period for merchandise sales. Outlook for apparel remains constrained

Interim results for the 26 weeks ending October 2016 revealed a tough trading environment for the Mr Price group, as revenue increased only marginally, by 1.5%, and diluted headline earnings per share declined by 13.7%. In turn the group has chosen to reduce the interim dividend offering by 8%. 

A break down of divisional income is tabled below.

The apparel division, which accounts for around 70% of group sales has been weighed down by a weak performance in Mr P Apparel and Milady’s. Mr P Apparel was said to have been negatively affected by the late onset of winter and currency fluctuations, while Milady’s finds excuse for its drag on sales through a repositioning in the “merchandise fashion pitch to refocus on its core customer”. Mr Price Sport did however perform relatively well for the apparel division, with sales increasing by 13.3%.

The weak performance in the apparel division follows on from weak sales numbers realised by sector companions Truworths, Woolworths and Foschini, highlighting a tough period for clothing retail in the current weak consumer environment.

Mr Price remains extremely cash generative, providing an enviable return on average equity to shareholders. However, the market has become accustomed to year after year earnings growth, which in the short term has reverted to a double digit earnings contraction. While in part, the difficult interim period can be attributed to a weak consumer environment (evident in fellow sector companion’s softer clothing sales), the extent to which the competitive landscape may be contributing to the decline in apparel sales is uncertain.

The group’s outlook for the remainder of the year provides little confidence that the short term earnings decline will reverse course, as the lottery of this year’s Christmas trading period has been cited as the decisive factor therein.

However, the company has seen its share price discount by more than half its value since its highs in 2015, while dropping more than 45% since the quarterly trading update (which had forewarned of a challenging interim period). With this in mind it does feel that perhaps the downside in the share may be capitulating at present. A Thompsons Reuters poll of 13 analysts maintain an average rating of hold for The Mr Price Group. 

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

Find articles by analysts

This information has been prepared by IG, a trading name of IG Markets Limited and IG Markets South Africa Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. International accounts are offered by IG Markets Limited in the UK (FCA Number 195355), a juristic representative of IG Markets South Africa Limited (FSP No 41393). South African residents are required to obtain the necessary tax clearance certificates in line with their foreign investment allowance and may not use credit or debit cards to fund their international account.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 79% of retail investor accounts lose money when trading CFDs with this provider.
You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage.