Mr Price shares gap higher on positive results update

Key Takeaways:

1. The Mr Price Group Limited recorded growth in retail sales of 9.9% during the third quarter of the financial year.
2. The group gained 130bps market share over the period, with strong sales growth in the flagship division Mr Price Apparel and acquisitions.
3. Performance improved significantly in December, with retail sales up 15.5% and a market share gain of 180bps.
4. The group achieved gross margin gains in each of its trading segments and in eight of the nine trading divisions during the period.
5. The South African GDP growth outlook for 2024 is likely to be constrained, and supply chain challenges, such as port congestion and shipping route instability, may impact stock growth. The group will take necessary action to mitigate these risks.

Results update for the 13 weeks ending 30 December 2023

In the competitive world of retail, Mr Price Group Limited (JSE: MRP) has delivered a compelling performance. During the 13 weeks ending December 30, 2023, Mr Price Group reported a significant 9.9% increase in retail sales, amassing a total of R13.2 billion, with comparable store sales rising 4.1%. This growth outpaced the total market, which saw a 3.4% increase, allowing Mr Price Group to expand its market share by 130 basis points.

The financials reveal that the Apparel segment, which includes the flagship Mr Price Apparel division, was the star performer with an 11.7% growth contributing 83.2% to retail sales. This segment not only achieved strong double-digit sales growth but also gained 150 basis points of market share. The kids' department excelled, reinforcing the potential of the newly launched Mr Price Kids concept. Acquisitions like Power Fashion and Studio 88 also outperformed the market, with Power Fashion achieving its highest market share on record.

The Home segment, including Mr Price Home and Sheet Street, along with the burgeoning Yuppiechef, showed a consistent uptick in sales throughout the quarter, ending with mid-single digit growth in December. The Telecoms segment wasn't far behind, with a 9.0% boost in sales and a market share increase of 70 basis points.

Inflation management was another highlight, with the Group retail selling price inflation contained at 4.9%, below the Consumer Price Index (CPI). This was achieved even as fewer markdowns were made compared to the previous year, which resulted in more full-price sales and a higher gross margin percentage across the board.

The expansion strategy was equally aggressive, with the addition of 85 new stores, taking the total footprint to 2,892 stores. This expansion translated into a 7.1% increase in trading space on a weighted average basis. Notably, cash sales, which represent a whopping 90.4% of total retail sales, saw a 10.5% increase, underscoring the Group's financial health and customer spending power.

The Group's commitment to a robust credit policy saw credit sales growing by 4.6%. The financial prudence and strategic retail positioning of Mr Price Group are clear indicators of its strong market performance and future potential.

Looking ahead, the South African GDP growth outlook for 2024 remains cautious, with consumer spending expected to be under pressure in the first half of the year. However, with inflation potentially moderating and the possibility of interest rate retractions in the second half, there could be a silver lining on the horizon.

Despite the optimism, challenges such as Durban port congestion and instability in the Red Sea shipping route pose risks to the supply chain, potentially affecting stock levels and operational efficiency. The Group is, however, poised to continue its mitigation strategies to minimize these impacts.

The company's focus on profitable market share gains and the sustained performance of its acquired businesses are testament to its strategic agility and operational excellence.

Mr Price – technical view

The share price of Mr Price has produced an upside breakout of the 16240-resistance level. The move higher suggests 17810 and 18445 to further resistance targets. The share price is however overbought at present as well. In lieu of this, traders might prefer to look for long entry on a pullback towards gap support at 16600. In this scenario a close below the breakout level at 16240 might be used as a stop loss consideration.