South African fashion and homewares retailer Mr Price reported a 27% earnings rise on Thursday, boosted by its store expansion programme, and set fresh growth targets for coming years.
Diluted headline earnings rose to 183,6 cents per share in the year ended March 31, while revenue from continuing operations increased 24% to R6,1-billion, the firm said on Thursday.
The results were at the higher end of a 20% to 30% range for growth in headline EPS — the key profit measure for South African firms and excludes non-trading, capital and certain extraordinary items — given by the group on May 14.
Mr Price chief executive Alastair McArthur said in a statement the group would continue with its expansion strategy and aimed to double trading income over the next five years.
The group set revised five year targets of R15-billion in revenue and an operating margin in excess of 12%.
By 10.03am GMT, Mr Price share were trading 1,8% stronger at R31,50, while the JSE general retailers index was up 0,2%.
The company said it had expanded its trading space by 19% in the period under review as it increased its number of stores from 761 to 829.
Alistair Lea, a portfolio manager at Coronation Fund Managers, said he was cautiously optimistic on the retailer’s five-year old expansion drive.
”They [Mr Price] have been very successful so far … I may be a bit cautious, in the case of a slowdown [in the retail sector] it could hurt,” he said.
Growth opportunity
The retailer has opened its first franchise store in Lusaka, Zambia and a further franchise store was successfully opened in Maputo, Mozambique in early May 2007.
”We see franchise stores as a further growth opportunity for the group. Our franchise model is a low-cost, low-risk one in which goods and fixtures are paid for upfront or bank guaranteed,” McArthur said.
He said the retailer would be concluding further franchises in a number of African countries in the coming year and was looking at opportunities in other countries.
Mr Price said prospects for the coming year were positive and it expected another year of earnings growth, countering gloomier comments from some other retailers.
Earlier this month, furniture retailer JD Group warned of a slowdown in the country’s retail sector.
Retailers in Africa’s largest economy have benefited from record sales sparked by record low interest rates, tax cuts and the emergence of a black middle class over the past few years.
But three rate hikes in the past year and rising inflation concerns have curtailed some of the exuberance.
Mr Price said its debtors book grew to R450-million, with cash sales as a percentage of total sales down from 89% to 84%.
Lea said because Mr Price was primarily a cash-based retailer, it should fare better than credit-based retailers. – Reuters