Mr Price has warned of rising shipping rates and longer order lead times because of increased tension in the Red Sea, which has led to ships being rerouted around the Cape.
However, it says it is working to mitigate port challenges including those in SA that delayed clothing orders arriving last year. “The instability of the Red Sea shipping route is increasing transit times. This has also resulted in increased shipping rates, however the group’s rates are contracted until June.”
Increasing shipping costs, though below their highs of the Covid-19 pandemic, will add costs to local importers and retailers such as Lewis that sells large amounts of foreign manufactured furniture.
Mr Price reported healthy third-quarter growth to December 30, saying on Thursday that its retail sales rose a robust 15.5% in the last month of the year, supported by its core apparel division, which it said continued to gain market share.
Same-store sales, which strip out new stores, rose 8% year on year. The numbers were also boosted by backup power in all its stores, which ensured seamless trading during the Christmas period, a crucial time for retailers.
Mr Price was behind other retailers in implementing alternate power in its stores, but has now caught up with the rollout.
Makwe Masilela, from Makwe Fund Managers, said Mr Price’s results “were not too shabby given the strain faced by consumers from elevated interest rates and the high cost of living. They did well to navigate the disruptions caused by their new software system”.
Mr Price also reported much higher growth in the quarter than Woolworths, which this week said its clothing division grew by just more than 2%. However, this was in a non-comparable six-month period.
It is possible people are buying cheaper clothing and spending less at stores such as Woolworths and TFG (owner of Markham and Foschini), Gryphon analyst Casparus Treurnicht said.
If the general trend is marked by consumers buying more affordable clothing, it could benefit Pick n Pay clothing too, he said.
Mr Price clothing stores are not just affordable, they are popular. The brand has more than 4-million unique customers, according to data it shared recently from the Marketing All Product Survey (MAPS) that measures consumer spend across SA in all regions. It showed Mr Price has the highest number of shoppers out of all the apparel brands.
But Woolworths could still be working on higher profit margins, Sasfin’s Alec Abraham noted as it reported price increases of 11.4% in the six months to Christmas.
Mr Price’s increase in the quarter was just below 5%.
Retail sales at Mr Price’s home segment that includes Sheet Street and Yuppiechef rose a modest 0.9% year on year during the quarter. It is facing increasing competition from the newer stores in the home segment, such as Jet Home, Pep Home and private retailers such as Whitehouse.
For the three months to end-December, its overall retail sales rose 9.9% to R13.2bn, while comparable store sales were up just 4.1%.
“We anticipated a shift in momentum once we had successfully navigated the disruption of our software system change and the installation of load-shedding backup power facilities in all our stores,” CEO Mark Blair said.
Retail sales in the core apparel segment grew 11.7% in the October-December period as it gained market share for five consecutive months, according to Mr Price.
Mr Price has started opening kids and baby clothing stand-alone stores in malls near the adult stores and it says this strategy is doing very well.
“While sales growth was generally strong across all merchandise departments, the performance of kids was a standout and continues to bode well for the new Mr Price Kids concept, which now has 30 stores, and has the potential to be a significant retail chain in the group,” the company said.
The newly acquired Power Fashion delivered double-digit sales growth and achieved its highest market share level on record in December.
Studio 88, which sells branded sneakers and footwear, grew sales by high single-digits during the period against a strong base set a year ago.
The telecom segment grew retail sales by 9%.
Mr Price opened 85 new stores, taking its total store base to 2,892.
Mr Price’s share price gained the most in two months on Thursday, up 6.38% to R170.86.
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