Mr Price, trading update

As breathtaking the rise of the Mr. Price share price was, the fall has been equally mind numbing. Except when it happens the other way around, it feels like ice water has been poured all over you on a winter day. A Mr. Price trading update on Friday afternoon caused the share price to fall into a heap, the stock was down nearly 18 percent by the close on Friday. What? This year the stock nearly clocked 200 Rand a share, a quick look Friday saw it close to 150 Rand. How is that possible? Total sales growth for the third quarter was a mediocre 6.5 percent for the group, with retail selling price inflation up at 6.6 percent. Effectively meaning that sales in inflation terms are flat. That was the last thing that Mr. Market needed to see and hear, with the stock trading on a pretty demanding multiple, the expectations are always high. One earnings miss, or a near miss, and the stock was flamed.

The company does provide a little light on what is currently ongoing: "Looking forward, the sales base in February and March of the Q4 trading period, and beyond, is less challenging. Although the January base is still high, an improvement in sales growth rates has been experienced to date."

There is a conference call a little later today, at 16:00, I am sure that a little light will be shed on the average sales experienced in the December period, particularly when everyone else seemed to be doing a little better. From a fundamentals basis, this is about as cheap as I have seen the stock look in a very long time, the stock trades right at the bottom end of their multiple range, in the mid teens historic and lower on a forward basis. The biggest shareholder? The PIC (on behalf of government pensions no doubt), who own over 15 percent of the stock. The yield, which was never the reason that you bought Mr. Price, now sits closer to over four percent forward. That certainly sounds like a good reason to start adding slowly!