Mr. Price results

Yesterday we had unaudited group results for the 26 week period ending 1 October 2011 from the ever impressive Mr Price. 367 Mr Price stores, 143 Mr Price Home store, 45 Mr Price Sports, 191 Milady's and 232 Sheet-Streets all ticking away at a good pace. That is 978 stores which includes 20 franchises and 49 stores outside of SA. They employ 18 176 people. Nice.

Retail sales for the group increased 10.7% while same store sales increased 9.6%. The retail sector as a whole reported a 7.5% growth. Remember that this period is compared to what one would consider a high base. Firstly retail sales for this group have been growing constantly over the last few years, secondly the affects of the World Cup. Not because tourists were buying but because school holidays were so long over that period.

Gross margin increased slightly from 41.2% to 41.3% due to good cost management. This resulted in a nice increase in operating margin and along with price increases overall earnings per share increased by 22.2% compared to this period last year, this equated to 187.3c. The share trades at 8000c but don't get too worried, the second half is where they make their big bucks. Look at the comparisons from last year. In the first half they made 153c but for the full year they made 405c (adjusted to 52 weeks). So for the second half they made 252c, almost 40% more than the first half.

Let's assume (I'd say based on their track record that this is a fair assumption) that they maintain a 10% growth in retail sales for the second half compared to what they did last year. Let's then assume that that profits increase 15% on the 252c they made second half last year. That means they'll make 477c for the full year and trade on a forward PE of 16.8. Pretty standard compared to their peers and in a retail sector that is clearly growing rapidly plus we are dealing with one of the best operators in the industry, I'd say there is still a lot of room for growth in the share price.

Let's not forget about the dividend. 81.2% of sales are made in cash so their balance sheet is very strong. They maintain a 2 times cover which, if earnings of around 477c are achieved, will put them on a yield of 3% and growing. They like all the others are concerned about international debt concerns. Yet they mention that October sales have already been good which should set them up for a successful festive season. Special mention goes to retiring chairman Alastair MacArthur who has been at the company since 1991 and was CEO from 1997 until 2010.