The SA business scene has few highly successful disrupter companies — companies whose owners aren’t happy with the status quo and are convinced they can perform far better.
Discovery, Investec, Nando’s and Capitec immediately spring to mind in this context. But in retail there are precious few genuine disrupters. To be sure, Boxer is highly innovative, as are Shoprite and TFG. But I would hesitate to describe them as disrupters.
However, Mr Price is a disrupter. It started life using an old department store model (John Orr) as its base, then morphed into something called Specialty Stores and finally became Mr Price. This all occurred relatively quickly during the politically turbulent era of the 1980s and 1990s.
It took tremendous guts and passion to persevere with a formula that had never really been tried before in SA — selling fashionable clothing at cheap prices. Many local retailers provided cheap clothing at the time, such as Pep Stores, but they could hardly be described as fashionable. There was another element that differentiated Mr Price from the herd — its raucous, brightly painted stores were fun to shop in.
It has proved to be a wonderfully resilient business over the years, and has managed to grow organically and, more recently, by acquisition. Though clothing and apparel is the mainstay of the business, that hasn’t prevented the group from investing in other areas, such as sport, home furnishings and financial services. But they have always stuck to their knitting when venturing into other areas, for example by offering tasteful home décor products at a reasonable price.
Mr Price’s philosophy has held it in good stead over the years and has allowed it to survive and prosper even in current the tough economic climate. It is by far the largest pure-play JSE-listed clothing, footwear and textiles retailer in terms of market capitalisation. And even though growth has slowed markedly in recent years, Mr Price has an enviable ultralong track record, with compound annual growth in headline earnings since 1985 of 21%. This consistency in earnings is one of the main reasons Mr Price remains a firm favourite among institutional shareholders.
For the year to end-March group revenue rose 7.9% to R40.9bn, while operating profit rose 8.9% to R5.8bn. Segmentally, Mr Price Apparel was the largest revenue contributor at 42.5%, followed by Studio 88 on 21%, Mr Price Home (11.1%), Power Fashion (6.9%), Mr Price Sport (5.2%), Sheet Street (4.3%), Miladys (4.1%), Telecoms (3.4%) and Yuppiechef (1.5%). The second half was much better than the first. Pretax profit rose 11% to R5.2bn while attributable earnings rose 11.2% R3.6bn.
Headline earnings per share rose 10.7% to R14.24, and the final dividend was increased 12.7% to 593.5c per share, making it 897.1c in total for the year. There was zero debt on the balance sheet at year-end, with R4.1bn in cash.
The rest of calendar 2025 will undoubtedly remain tough for all SA businesses, beset as they are with a stagnant local economy. And the problems could well be compounded once the so-called Trump tariffs start being felt.
Interest rates are likely to continue falling throughout the rest of the year and possibly into next year, giving relief to consumers. And Mr Price has negotiated favourable shipping rate contracts to end-2025. Low oil, polyester and cotton prices should also help keep expenses under control.
At the current share price of R207.83, Mr Price is trading on a historic price-earnings ratio of 14.6 times. This compares with Truworths on a PE of 8.7 times and TFG on 11.8 times. I believe the superior metrics of Mr Price justify such a premium rating.
• Gilmour is an investment analyst.
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