Release Date: November 21, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Mr Price Group Ltd (MRPLY, Financial) reported a revenue increase of 5.2% to ZAR17.6 billion for the first half of the fiscal year.
- The company achieved a gross profit growth of 8.1%, with a gross profit margin expansion of 110 basis points.
- Business confidence in South Africa is at a three-year high, and consumer confidence is at a five-year high, indicating a positive economic environment.
- The company opened 92 new stores in the first half, with plans to open an additional 108 stores in the second half, indicating strong expansion efforts.
- Mr Price Group Ltd (MRPLY) maintained a strong cash position, with cash reserves up 90.4% from the previous year, ending the period with ZAR2.2 billion.
Negative Points
- The first half of the fiscal year was challenging due to pre-election uncertainty, currency volatility, and high interest rates, impacting consumer affordability and confidence.
- Operating expenses grew by 9.2%, driven by increased store openings and higher utility costs, which could pressure future profitability.
- The apparel segment's operating profit declined by 1.6% due to challenges in the Studio 88 and Miladys businesses.
- The company faced supply chain disruptions, leading to increased inventory levels to mitigate risks of shipping and port delays.
- The homeware segment did not achieve positive market share gains, although it managed to grow profits despite a constrained top line.
Q & A Highlights
Q: Can you comment on the impact of the two-pot system and interest rate cuts on trade post the half-year period?
A: It's challenging to assess the impact right now. Our stock decisions in September were more about supply chain disruptions rather than the two-pot system. We need to monitor how consumer confidence and spending evolve, especially with the positive changes in consumer and business confidence, interest rates, and fuel prices.
Q: How has Studio 88 performed post the half-year period compared to H1?
A: Studio 88, like other businesses, faced a tough trading environment in H1. However, it has been one of our best performers in the six-week period post-September, showing strong sales and gross profit gains.
Q: What is the outlook for operating expenses in the second half, and how will operating leverage be affected as sales increase?
A: We expect expenses in the second half to be slightly higher than in the first half, mainly due to ambitious store growth plans. However, we aim to maintain an expense-to-sales ratio around 28%. We anticipate some margin expansion in the second half as the economic cycle improves.
Q: Can you expand on the improving credit approval rates and how they relate to the macro environment?
A: Our credit decisioning cycle is mature, focusing on customer affordability. In the second half, we've seen positive signs in the aging profile of the book and defaulters, allowing us to slightly improve approval rates while monitoring customer performance.
Q: How has Mr Price's relative price positioning to peers changed, and has this helped in getting consumers back into stores?
A: Our value positioning remains strong, supported by low inflation. The execution of product and price point has been effective, and the improving consumer position sets us up well for H2.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
