Mr. Price sales update.

This morning we had a trading update for the third quarter (2 October 2011 to 31 December) from Mr Price. Wow that was quick, maybe Stats SA should take note. As expected it was good news from the guys who seem to get it right every time. Sales grew 15.9% compared to the festive season of 2010.

Personally I had nothing to do with this sales growth, I wanted to but when I went into the store the queues were just too long. Of the divisions, apparel (Mr Price, Mr Price Sport and Milady's), which is responsible for 73.9% of sales grew 16.9% with same store sales of 13%. The Home division achieved sales growth of 13% with same store sales of 11.4%.

So clearly a balanced mix and a good sign for what could be a fantastic festive season for retailers as Massmart have also shown. The big question about the retailers however is what is in store for 2012 (excuse the pun). As far as the stock market is concerned the sector was up 14.7% with lots of the constituents trading at lofty valuations. Are they too expensive? I really don't think so and I believe our retailers will maintain 2011's growth.

Our economy is very westernised which means we love consuming. The Adcorp jobs report showed that over 103 000 jobs were created in December so we are on the right track in that department. Our economy is still growing at 4% and our population is increasing. We also have a huge amount of people who are trying their upmost to enter the middle class. Although it is not great for the economy long term, above inflation wage increases thanks to the labour unions cannot be bad for the retailers. And what happens when you manage to break out of the poverty trap? You consume, consume, consume like never before because that is what you have set out to achieve.

I also believe we underestimate the impact of the informal sector. Over 80% of Mr Price sales were cash. Yes that is their business model but it is also why they have been so successful. For every formal sector job created in South Africa more informal jobs are created. Yes we still have big issues with regards to unemployment and education. But imagine how strong the retailers will be once this issue starts being eradicated. It will take time but I do believe we are moving forward, slowly but surely.