Mr Price trading update, still growing fast

Yesterday we had a 4 month trading update from one of the darlings of the JSE, Mr Price. The stock has been one big success story coming from R15.10 in July 2008 to R136 today, just short of a ten bagger which I'm sure we will see pretty soon. How did the update look? It was solid with 14.9% sales growth, 9.7% of that was from an increase in sales while the rest was due to price increases or inflation as retailers like to call it.

Comparable sales grew 9.5% while the company opened 24 stores and closed 5. Cash sales is still big but decreasing slowly, now 78.5% from 81.2% last year. Apparel is still the big money driver which includes Mr Price, Mr Price Sport and Miladys. This constitutes 71.6% of group sales and grew 15%. The home division which is Mr Price Home and Sheet Street also grew nicely at 14.4%.

This is good news on two fronts. Firstly, this is a very recent update (4 months to 28 August 2012) and shows that the South African consumer is still showing a lot of strength. Because most of the sales are cash you cannot say that this growth is driven falsely by credit. The South African middle class is still growing, wages are increasing and the retailers are benefiting. That is the Macro view.


From a micro view it still looks like Mr Price are getting it just right.
There are queues at every one I go to as people from every background and income group enjoy their great value for money. The fashions are up to date and I really like their sports division. Everyone loves sport and with the great weather we are having at the moment (sorry Cape Town) who doesn't want to get outside and soak in the rays with some outdoor activities. We have the climate, the culture and the geographic makeup for sports apparel to really take off as a consumer good in this country.

Although their goods are cheap the share price certainly isn't, trading on 27 times last year's earnings. But I wouldn't bet against these guys.
Opening up 24 stores in 4 months is huge! And this will continue to grow.
And who is to stop them from taking this winning formula further up into Africa which they are doing already of course. Clothing is less complicated than food when it comes to African expansion so expect this to be rolled out quicker than the grocery guys.