Mr Price Group Limited · JSE:MRP
Mr Price — H1 FY2025 Earnings Presentation
48 slides from Mr Price's earnings presentation, November 2024
Slide 1: Interim Results FY2025 to 28 September 2024
Interim Results FY 20 25 to 28 September 2024
Slide 2: Agenda: Backdrop, Performance, Value Creation
01 02 03 RETAIL ENVIRONMENT GROUP PERFORMANCE STRATEGY PROGRESS & OUTLOOK Backdrop Performance Value Creation By Mark Blair By Praneel Nundkumar By Mark Blair
Slide 3: Retail Environment: Backdrop
RETAIL ENVIRONMENT 01 Backdrop By Mark Blair - CEO
Slide 4: Operating Environment
OPERATING ENVIRONMENT Persistence of economic and consumer pressures into 2024. Local macroeconomic positives signal an upward inflection point Global: South Africa: • Ongoing geopolitical tensions • Extended period of low growth • Supply chain volatility • Further economic contraction pre-election
Slide 5: Consumer Environment
CONSUMER ENVIRONMENT • Late onset of winter materially impacted retail sector sales performance in April and May • Consumer affordability remained highly constrained during H1: - Inflation increases between 2022 – 2023 impacted disposable income - Higher for longer interest rates delayed change in c
Slide 6: Group Highlights
GROUP HIGHLIGHTS Improving sales and comparable sales trend through H1 Profitable market share gains of 60bps Gross profit increased 8.1% and gross margin expanded by 110bps to 39.7% 92 stores opened, 2 958 in total Significant sales momentum into H2, double digit growth across all segments 6
Slide 7: Group Performance
GROUP PERFORMANCE Despite the challenging operating environment, sales momentum improved at better GP margin SALES G R OWT H Insights • Highly erratic spending patterns through the half 12.7 • April – May GP - Late onset of winter margin - Election uncertainty +110bps • June % 6.6 - Pent-up winter d
Slide 8: Group Performance: Increasing Momentum Post H1
GROUP PERFORMANCE INCREASING MOMENTUM POST H1 October - 16 November 2024: strong sales momentum across the business, all segments reporting double digit growth and margin expansion SALES G R O WT H 14.7 % 11.5 5.3 5.1 4.9 H1 Q1 Q2 Oct Nov 8
Slide 9: Group Interim Results
GROUP INTERIM RESULTS Revenue Gross profit EBITDA* Operating profit R R R R 17.6bn 6.8bn 3.5bn 2.0bn +5.2% +8.1% +5.8% +4.0% HEPS Diluted HEPS# Dividend per share Cash reserves R 481.8c 468.0c 303.6c 2.2bn +7.1% +6.5% +7.1% +90.4% 9 *EBITDA reconciliation on pg 45 | #HEPS reconciliation on pg 44
Slide 10: Group Performance: Performance
GROUP PERFORMANCE 02 Performance By Praneel Nundkumar - CFO
Slide 11: Revenue
REVENUE H1 R’m FY2025 FY2024 Retail sales growth | H1 FY2025 % change Retail sales 16 902 16 087 5.1% Q1 Q2 Other income 636 607 4.8% Total retail sales growth 4.9% 5.3% Financial services & telecoms 562 523 7.3% Comparable stores sales growth 0.1% 0.7% Other1 74 84 (11.8%) Total retail sales, inter
Slide 12: Group Income Statement
GROUP INCOME STATEMENT H1 R’m FY2025 FY2024 • 1Increase on interest on lease liabilities offset % change by interest income on higher cash balance Revenue 17 629 16 751 5.2% • 2Studio 88: - Materially seasonally weighted to H2 Gross profit (pg 17) 6 751 6 245 8.1% - Net of amortisation on intangible
Slide 13: Segmental Performance: Apparel
SEGMENTAL PERFORMANCE APPAREL % Divisional contribution (Retail sales) Segment contribution 78.7 (LY: 78.8%) % CHANG E FY2025 Retail sales +4.9% Operating profit (1.6%) % 43.2% SALE S DR IV E R S 4.5 6.8% Comp sales growth +0.6% 5.5% Units growth +2.9% RSP inflation +1.5% 18.6% Sales density R37 107
Slide 14: Segmental Performance: Homeware
SEGMENTAL PERFORMANCE HOMEWARE % Divisional contribution (Retail sales) Segment contribution 17.7 (LY: 17.9%) 1.4% % CHANG E FY2025 % Retail sales +4.3% 4.5 Operating profit +7.8% 11.8% SALE S DR IV E R S Comp sales growth +0.1% Units growth (1.5%) RSP inflation +5.5% Sales density R29 377m2 Mr Pric
Slide 15: Segmental Performance: Telecoms
SEGMENTAL PERFORMANCE TELECOMS % Divisional contribution (Retail sales) Segment contribution 3.6 (LY: 3.3%) % CHANG E FY2025 3.6% Retail sales +13.1% Operating profit +14.7% SALE S DR IV E R S Comp sales growth (0.8%) Units growth (14.2%) RSP inflation 37.1% Mr Price Cellular and Powercell 15
Slide 16: Space Growth
SPACE GROWTH Total group owned: 2 958 stores Apparel segment 2 318 stores Homeware segment 594 stores Cellular segment 46 stores Mr Price 612 Mr Price Home 232 Mr Price Cellular 46 Mr Price Kids 38 Sheet Street 341 (Total locations including store-in-store: 553) (Mr Price Kids assortment present in
Slide 17: Gross Profit Analysis
GROSS PROFIT ANALYSIS FY2025 FY2024 Group 39.7% 38.6% Apparel 40.2% 39.1% Homeware 42.2% 40.5% Telecoms 20.3% 20.0% • Group: - Strong product execution: merchandise GP margin up 120bps - Clean exit of winter season and lower markdowns • Apparel: - Four out of five divisions grew GP margin - Power Fa
Slide 18: Overhead Expenses
OVERHEAD EXPENSES Total expenses: Selling expenses 75.2%; admin expenses 24.8% Manageable costs well controlled • Employment costs: R’m FY2025 FY2024 H1 % change % of RSOI# - 209 new stores opened in last 12 months - Impact of minimum wage increase on higher staff complement Depreciation* and amorti
Slide 19: Operating Margin
OPERATING MARGIN FY2025 FY2024 Group 11.4% 11.5% Apparel 11.3% 12.0% Homeware 9.4% 9.1% Telecoms 10.2% 10.1% • Group: - H1 margin typically lower than H2 - Weaker Q1 sales growth impacted operating leverage • Apparel: - Margin impacted by high price point branded merchandise and impact of negative c
Slide 20: Balance Sheet Analysis
BALANCE SHEET ANALYSIS Gross inventory Excluding GIT*: 9.5% 13.6% Debt free Stock freshness of 86.5% (+550bps) Trade and other receivables Net working capital 14.9% (R287m) Unencumbered balance sheet Cash & cash equivalents Debtors’ interest and charges up 6.0% Trade & other payables R2.2bn 20.7% Su
Slide 21: Supply Chain Finance Programme
SUPPLY CHAIN FINANCE PROGRAMME INTERNATIONALLY RECOGNISED The Working Capital Forum: • Group received the award for ‘Best Use of Supply Chain Finance’ and the gold award for ‘Best Use of Working Capital’ • First time an African country has received a gold award from the forum 21
Slide 22: Cash Flow Movements
CASH FLOW MOVEMENTS R’m Cash generation driving working capital improvement 7 000 Operating R2 950 Investing Financing (R3 269) (R303) 3 213 288 6 000 (287) (264) (316) 5 000 116 2 159 4 000 (1 381) (453) 2 798 3 000 2 000 (1 531) (24) 1 000 0 Cash from Working Net interest Taxation PPE & Dividends
Slide 23: Allocation of Capex
ALLOCATION OF CAPEX Funded wholly from cash reserves Capital expenditure H1 FY2025 m R383 13.0% 9.0% • Primarily allocated to stores (70.7%) % Capital 48.4% • Continued investment into revamps 7.3 allocation 12.7% Key 9.6% New stores Expansions Revamps Technology Logistics Other 23
Slide 24: Credit Growth Performance
CREDIT GROWTH PERFORMANCE Credit sales % of total sales % YoY growth 19.0% approval rate R 2.0 bn 11.9 +2.7 Credit growth & • Opportunity to increase to upper limits in positive trending cycle early signs of approval rate rising to >20% contribution • Risk tolerance to be driven by data insights Deb
Slide 25: Strategy Progress & Outlook: Value Creation
STRATEGY PROGRESS & OUTLOOK 03 Value Creation By Mark Blair - CEO
Slide 26: Capital Markets Day 2024
CAPITAL MARKETS DAY 2024 Four quarters of consecutive market share gains • Hosted in September with 56% of the group’s shareholding present • 96% of attendees recognised the event as an effective engagement opportunity with management, and received greater clarity on group strategy • Strong focus on
Slide 27: Invested Through the Cycle: Customer Diversification
INVESTED THROUGH THE CYCLE CUSTOMER DIVERSIFICATION Strategic investment into acquisitions and organic concepts: • Strengthening and diversification of the group’s fashion-value offerings • Expansion of customer base across multiple income segments Premium yuppiechef.com Aspirational value/Niche stu
Slide 28: Invested Through the Cycle: Expanded Store Footprint
INVESTED THROUGH THE CYCLE EXPANDED STORE FOOTPRINT N U MBER OF N EW ST O R ES O PEN ED T O TAL C API TAL EXPEN D I T U R E Over the last five years, invested ~R10bn in CAPEX and acquisitions, returning R8.6bn to shareholders in dividends 238 ~200 180 1 100 137 945 108 666 R’m 82 72 471 456 58 54 45
Slide 29: Invested Through the Cycle: Operational Excellence
INVESTED THROUGH THE CYCLE OPERATIONAL EXCELLENCE Merchandise Our people Technology Supply chain Logistics processes Investment into a Reinforcing tried and Successful Improved agility Established supply strong leadership tested multi-decade implementation of enabling faster chain (logistics) team w
Slide 30: Invested Through the Cycle: Gauteng DC Enhancement
INVESTED THROUGH THE CYCLE GAUTENG DC ENHANCEMENT Strategic supply chain enablement Current distribution centre facilities and operations: • KwaZulu-Natal - Hammarsdale: 62 000m2 - Power Fashion: 11 000m2 • Western Cape - Yuppiechef: 4 000m2 • Gauteng - Studio 88: 10 000m2 - Gosforth Park: 30 000m2
Slide 31: Invested Through the Cycle: Brand Strength
INVESTED THROUGH THE CYCLE BRAND STRENGTH South Africans continue to choose our differentiated fashion-value offerings Most shopped Highest brand apparel & homeware equity in the retailer in apparel and South Africa homeware sectors Supported by Store revamps Sought-after omni-channel offering Stron
Slide 32: Capital Allocation Framework
CAPITAL ALLOCATION FRAMEWORK Committed to capital allocation framework: • Allocate cash to highest returning opportunities - Invest for the long-term in the most attractive opportunities based on returns and scalability • Ongoing assessment of dividend policy and share buybacks C ON C EP T C ON SI D
Slide 33: Strategy Framework
STRATEGY FRAMEWORK Strategic outcomes 1. Profitable market share 3. Diversified offering 5. Operational excellence Surprise and delight our customers People | Operations | Sustainability • Growing comp sales • Omni-channel • Digital & tech modernisation • Space growth • Differentiated fashion • Supp
Slide 34: Profitable Market Share: Group
PROFITABLE MARKET SHARE GROUP Four quarters of consecutive market share gains; sales growth exceeding the market since Q2 FY2024 G ROU P MAR K ET SH AR E & SALES G R O WT H H1 market share gains ERP implementation Post H1: RLC StatsSA H1: +60bps Full backup power +60bps 12 10 +60bps +70bps* 8 +120 +
Slide 35: Profitable Market Share: Apparel Segment
PROFITABLE MARKET SHARE APPAREL SEGMENT Five quarters of consecutive market share gains, more than R1bn recovered in the last 12 months APPAREL SEG MEN T MAR K ET SH AR E & SALES G R OWT H Focus in H2 H1: +70bps 16 +150 14 • Effective execution of differentiated fashion-value 12 merchandise +100 10
Slide 36: Profitable Market Share: Homeware Segment
PROFITABLE MARKET SHARE HOMEWARE SEGMENT Increasing sales momentum H OMEWAR E SEG MEN T MAR K ET SH AR E & SALES G R O WT H Focus in H2 H1: -40bps 7 • Meaningful GP margin improvements 6 5 • Capitalise on additional discretionary spend 4 anticipated in the second half 3 2 • Further build on sales gr
Slide 37: Economic Outlook
ECONOMIC OUTLOOK Global South Africa UNCE RTA I NTY R E MA I NS : MA NY POS I T IV E S S I G NA LI NG A CHA NG E I N CY CLE : • Ongoing geopolitical tensions • GNU stability, with improved governance and increased transparency on • Supply chain volatility public spending • US election outcome impact
Slide 38: Consumer Outlook
CONSUMER OUTLOOK Entering a more positive phase for consumers with improving disposable income & household expenditure Two-pot retirement reform: Consumer confidence has reached a five-year high: • R35bn paid out since 1 October 2024 • Passenger vehicle sales highest in October since 2019 • Individu
Slide 39: Trading Insights October - November 2024
TRADING INSIGHTS OCTOBER - NOVEMBER 2024 Sales growth trend % October +11.5 % November (to 16th) +14.7 Combined 7-week period +12.4% Double digit sales growth in all three segments Top 4 performing divisions: Studio 88, Mr Price Apparel, Power Fashion and Yuppiechef Inventory position at end of Sept
Slide 40: Group Outlook: Focus Areas & Forecast
GROUP OUTLOOK FOCUS AREAS & FORECAST Focus areas remain guided by our strategic outcomes Further store rollouts | ~108 new stores in H2 Strong execution of launched organic concepts | Mr Price Kids and Mr Price Cellular Growth in comp sales Continued momentum of profitable market share gains Continu
Slide 41: Progressing Next Growth Phase
PROGRESSING NEXT GROWTH PHASE Group strategy - ensure we do the right things to deliver growth After closing the initial acquisition of Studio 88, the remainder of FY2023 Research and Divisional strategy - ensure was dedicated to: data insights we are doing things right to • An inward focus on extra
Slide 42: Appendix
04 Appendix
Slide 43: Space Growth
SPACE GROWTH W.avg net Divisions Store movements Closing stores growth (m2) 3 20 650 4.9% 4 2 4 266 1.3% 1 176 1.6% (5 trading chains) 12 41 919 7.0% 2 14 307 9.1% 3 1 6 232 4.3% 13 1 341 (2.9%) 11 21 71.9% 5 46 39.7% Total store movements Total Net growth Stores 34 4 4 92 2 958 4.9% CL O SURES REDU
Slide 44: Earnings & Dividend Per Share
EARNINGS & DIVIDEND PER SHARE H1 FY2025 FY2024 % Growth Profit attributable to shareholders (R’m) 1 239 1 154 7.3% W. Avg shares in issue (000) 257 251 257 186 0.0% Basic earnings per share 481.5c 448.8c 7.3% Addbacks (R’m) 0.9 2.9 Headline earnings (R’m) 1 240 1 157 7.1% Headline earnings per share
Slide 45: EBITDA Reconciliation
EBITDA RECONCILIATION H1 FY2025 FY2024 % Growth Profit from operating activities 2 000 1 923 4.0% Total depreciation & amortisation 1 524 1 408 8.2% EBITDA 3 524 3 331 5.8% 45
Slide 46: Group Sales Growth Drivers
GROUP SALES GROWTH DRIVERS Geography Tender Type RSA Rest of Africa Cash Credit % % % % +4.8 +7.6 +5.1 +2.7 Cash % % % % % of sales 91.8 % of sales 8.2 % of sales 88.1 % of sales 11.9 % Bricks Online 88.1 Units RSP inflation % % % % +5.1 +4.0 of sales +2.0 +2.7 % % m % % of sales 97.7 % of sales 2.3
Slide 47: Rest of Africa
REST OF AFRICA Total % of group sales H1 FY2024 8.0% H1 FY2025 % 8.2 No. of stores Corporate owned stores Franchise 244 9 253 3 Ghana Kenya 12 Zambia 15 Mozambique 12 Sales growth (ZAR) Botswana 69 81 Namibia Eswatini 28 % FY2025 +7.6 Lesotho 24 47
Slide 48: Thank you
Thank you