Studio 88 proves promising for Mr Price
In its latest trading update for the 13 weeks ended 1 July 2023 (Q1 of the 2024 financial year), Mr Price showed strong growth thanks partly to its recently acquired majority share of Studio 88 Group.
Mr Price officially acquired a 70% stake in the clothing, footwear, and accessories brand Studio 88 (S88) in October 2022 for R3.3 billion rand – a deal which included private label brands SideStep, John Craig and Skipper Bar.
According to Mr Price, soft retail demand experienced by the sector during H2 of FY2023 continued into the first quarter of FY2024, aggravated by the highest levels of load shedding in the calendar year recorded in April and May 2023.
The group added that, as expected, the group’s new financial year got off to a slow start.
“Consumers continued to be negatively impacted by the rising cost of debt after the most recent interest rate increases in March and May 2023,” it said.
Despite these challenges, Mr Price experienced positive growth over the trading period that ended on 1 July 2023.
Retail sales grew 21.9% to R8.1 billion (comparable stores decreased 3.8%). Excluding S88, retail sales increased 0.9%.
South African retail sales grew 20.9% (excluding S88: 0.6%) to R7.5 billion, while Total store sales increased 22.8% (excluding S88: 1.2%). Online sales, contributing 2.4% to retail sales, decreased 5.3% (excluding S88: -7.5%, off a high base of 21.4% in the prior period).
Retail sales in the Apparel segment grew 29.5% (excluding S88: 1.2%). “Retail sales and comparable store sales trends in the group’s largest division, Mr Price Apparel, improved each month as the quarter progressed.
“Power Fashion and S88 continued to grow retail sales by double digits, and both businesses reported positive comparable store sales,” said the group.
In the Home segment, retail sales momentum improved from the double-digit decline in the fourth quarter of FY2023 to a decrease of 1.7%, as performances in Mr Price Home and Sheet Street improved.
Yuppiechef continued to report double-digit sales growth supported by its omnichannel expansion. The Telecoms segment remains robust, with sales in cellular handsets and accessories up 11.0%. Cellular merchandise is now trading in 484 stores, including 18 standalone stores, which continue to report strong comparable store sales growth.
Mr Price also noted that the store footprint increased by 58 new stores, and the group’s total footprint expanded to 2,756 stores.
Additionally, April commenced with power backup in 60% of stores in the group’s core business; however, trading performance improved as backup power solutions were extended to all stores by 30 June 2023.
“Cash sales which constitute 87.8% of total retail sales, grew 26.4% (excluding S88: 1.5%). Credit sales decreased by 2.7% as the group continued enforcing its strict credit granting criteria, limiting new account growth as it cautiously managed the deteriorating credit environment,” said Mr Price.
Outlook
The growth outlook globally and in South Africa for the remainder of 2023 is likely to remain muted, said the group.
“Disposable income is only anticipated to meaningfully improve during 2024 as consumers experience inflation moderation and interest rate relief,” it added.
Mr Price also said that improved performance in H2 is expected (compared to H1 FY2024 and the corresponding H2 period), as elevated levels of load shedding will be fully in the base, and the group now has backup power in all its stores.
“The group will continue to maximise the contribution from its acquisitions and is confident that it will deliver on its strategic ambitions,” the group added.
Read: Load shedding wipes another R300 million from Pick n Pay
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