Mr Price Group Limited · JSE:MRP
Mr Price — FY2024 Earnings Presentation
54 slides from Mr Price's earnings presentation, June 2024
Slide 1: FY Annual Results to 30 March 2024
FY Annual Results 20 to 30 March 2024 24
Slide 2: Backdrop, Performance, Value Creation
Backdrop Performance Value Creation Retail Environment 01 Group Performance 02 Strategy & Outlook 03 BY M ARK B LAI R BY P R AN E E L N U N D K U MAR BY MA RK BLA IR
Slide 3: Backdrop: Retail Environment
Backdrop Retail Environment 01 BY MA RK B LAI R - CE O
Slide 4: Operating Environment
Operating Environment Global SA Consumer • Geopolitical conflicts and instability • Low GDP growth • Negative real wage growth > 2 years • Supply chain disruptions • High unemployment rate • Disposable income constrained • US inflation remains ‘sticky’ • Volatile currency • Household expenditure dec
Slide 5: Operating Environment Continued
Operating Environment Continued CPI Greater impact of inflation on lower income consumers since July 2022 to present 11 10 9 8 7 % 6 5 4 3 2 1 Jan 21 Jul 21 Jan 22 Jul 22 Jul 23 Jan 24 EXPENDITURE DECILES 1 - 3 (R0 - R48 673) 4 - 7 (R48 674 - R143 174) 8 - 10 (>R143 175) 5 Source: Stats SA, ABSA Res
Slide 6: Group Highlights
Group Highlights Group FY2024 +30 bps Revenue growth +15.5% Cash balance of market share H2 +90 bps 292m units sold R 2.8 bn GP margin FY2024 +20 bps growth H2 +160 bps Operating FY2024 7.9 % 238 stores opened Cash conversion ratio profit growth H2 +13.2 % 103m units procured from 86.9 % HEPS FY2024
Slide 7: Group Annual Results
Group Annual Results Revenue EBITDA* Operating profit^ FY23 FY24 FY23 FY24 FY23 FY24 R32.9bn R37.9bn R7.2bn R8.2bn R4.9bn R5.3bn 17.0% Annual 15.5% 5.4% Annual 13.5% (0.5%) Annual 7.9% 6.5% H1 26.4% 9.2% H1 14.7% 13.0% H1 (0.4%) 25.3% H2 8.1% 3.0% H2 12.7% (7.7%) H2 13.2% Operating margin Diluted HE
Slide 8: Group Performance
Group Performance Sales growth and GP margin Insights 16.2 +190bps +190bps • Improved sales momentum, GP margin and market +100bps share gains from Q2 • Healthy quality of sales: more full-priced items sold • Q4 challenging for sector: group gained market share at higher GP margin 9.9 -350bps H2 8.4
Slide 9: Market Share | Highlights
Market Share | Highlights Consecutive months of market share gains 7 8 26 9 Source: Retailers’ Liaison Committee
Slide 10: Performance: Group Performance
Performance Group Performance 02 BY PRAN E E L N U N DK UMA R - CF O
Slide 11: Revenue
Revenue FY2024 FY2023 % change Retail sales growth FY2024 Retail sales 36 586 31 498 16.2% H1 H2 Other income1 1 197 1 170 2.3% Total retail sales growth 27.8% 8.4% Financial services & Telecoms 1 030 976 5.6% Total retail sales growth excl S88 3.8% 8.3% Other2 167 194 (14.3%) Comparable stores sale
Slide 12: Group Income Statement
Group Income Statement R’m FY2024 FY2023 % change R’m H1 H2 profit wedge Revenue (pg 11) 37 944 32 853 15.5% Revenue 26.4% 8.1% Gross profit (pg 17) 14 603 12 501 16.8% Gross profit 22.5% 12.9% Expenses (pg 19) 10 332 8 604 20.1% Expenses (pg 19) 33.6% 10.2% Profit from operating activities 5 307 4
Slide 13: Segmental Performance | Apparel
Segmental Performance | Apparel Divisional Contribution (Retail sales) Segment contribution 79.7 % (LY: 76.8%) % change FY2024 H2 Retail sales +20.5% +9.8% Retail sales excl S88 +7.9% +10.2% 42.2% Operating profit +15.8% +21.3% 4.6 % 6.7% Sales drivers FY2024 H2 Comp sales growth +3.3% +5.0% 5.4% Un
Slide 14: Segmental Performance | Homeware
Segmental Performance | Homeware Divisional Contribution (Retail sales) Segment contribution 17.1 % (LY: 19.9%) 1.4% % change FY2024 H2 4.4% Retail sales +0.3% +1.4% 11.3% Operating profit (23.0%) (12.6%) Sales drivers FY2024 H2 Comp sales growth (3.8%) (2.4%) Units growth (4.1%) (2.4%) RSP inflatio
Slide 15: Segmental Performance | Telecoms
Segmental Performance | Telecoms Divisional Contribution (Retail sales) Segment contribution 3.2 % (LY: 3.4%) 3.2% % change FY2024 H2 Retail sales +10.2% +12.1% Operating profit +55.5% +79.3% Sales drivers FY2024 H2 Comp sales growth +1.5% +0.6% Units growth 1.1% +0.1% RSP inflation +13.1% +14.2% Mr
Slide 16: Space Growth
Space Growth Total group owned 2 900 stores Apparel segment 2 256 stores Homeware segment 603 stores Cellular segment 41 stores Mr Price 599 Mr Price Home 229 Mr Price Cellular 41 Mr Price Kids 31 Sheet Street 354 (Total locations including store-in-store: 804) Miladys 266 Yuppiechef 20 Mr Price Spo
Slide 17: Gross Profit Analysis
Gross Profit Analysis Gross Profit Medium-term FY2024 H2 FY2023 target Group 39.7% 40.6% 39.5% 40% - 42% Apparel 40.5% 41.6% 39.9% 40% - 42% Homeware 40.6% 40.7% 41.7% 40% - 42% Telecoms 19.2% 18.5% 19.3% 18% - 20% GP margin performance • Group: - H2: +160bps to 40.6% - FY2024 merchandise GP margin
Slide 18: Gross Profit Analysis Continued
Gross Profit Analysis Continued Clear plans in place to grow or maintain GP margins per division GP margin medium-term target ranges <38% 38% - 40% > 40% 18
Slide 19: Overhead Expenses
Overhead Expenses Total expenses (R’m): Selling expenses 74.2%; admin expenses 25.8% % change Cont. to R’m FY2024 FY2023 % change • Excluding S88 expenses up 7.7% excl S88 RSOI# • Employment costs: - Higher variable performance linked incentive Depreciation* and amortisation 2 833 2 251 25.8% 7.8% 7
Slide 20: Operating Margin
Operating Margin Operating Margin Medium-term FY2024 H2 FY2023 target Group 14.0% 16.0% 15.1% 13% - 15% Apparel 15.3% 17.7% 15.9% 16% - 18% Homeware 10.5% 11.7% 13.7% 13% - 15% Telecoms 9.8% 9.5% 7.0% 9% - 11% Operating margin performance • Group: - FY2024 margin impacted by S88 seasonality - H2 mar
Slide 21: Operating Margin: Six Year Review
Operating Margin Six year review Long-term trend • Acquired 3 high growth, lower margin businesses • Challenging consumer environment 18.5 • Rising cost of doing business 16.4 15.9 17.8 17.5 17.7 17.1 Achieving medium-term targets 15.1 14.0 R’m • Higher comp sales % • Disciplined cost management • E
Slide 22: Defensive Business Model
Defensive Business Model Operating expenses* Lowest cost operator in 16 712 the sector 12 012 9 362 R/m2 8 745 7 675 0.9 Competitor 1 Competitor 2 Competitor 3 Competitor 4 MRPG Every decision made every day must support our value roots 22 *Investec Equities latest reported
Slide 23: Balance Sheet Analysis
Balance Sheet Analysis Gross inventory Long-term debt (excl S88) -4.2% Zero Stock freshness 85.8% (+240bps) Trade & other receivables Net working capital generated R38m in long-term debt facilities in S88 8.6% +R122m Cash & cash equivalents Debtors’ interest and charges up 12.1% Trade & other payabl
Slide 24: Cash Flow Movements
Cash Flow Movements R’m Cash generation driving working capital improvement 12 000 Operating R7 146 Investing Financing (R4 813) (R976) 525 7 885 122 10 000 -1 386 8 000 -978 2 798 6 000 - 1 911 -22 4 000 -2 804 -75 2 000 1 442 0 Apr 23 Cash from Working Net interest Taxation PPE & Dividends Treasur
Slide 25: Allocation of CAPEX
Allocation of CAPEX Funded wholly from cash reserves Capital expenditure FY2024 R1.1 bn 12.1% 14.3 % • Primarily allocated to stores (71.7%) 5.7 % 38.1 % • Backup power allocations prioritised over revamps Capital • Revamps to continue from FY2025 allocation 10.5% Key 9.4% 9.9% New stores Expansions
Slide 26: Credit Growth Performance
Credit Growth Performance CRE D IT SA LE S 19.3% approval rate (down 370bps) R 4.1 bn 11.1 % of total sales +1.7 % YoY growth DE BTORS’ BOOK R’m Mar 24 Mar 23 Mar/Mar • Reassessed suitability of the write-off point: - Historically conservative - led to higher post-write off recoveries Debtors’ book
Slide 27: FY2024 Highlights
FY2024 highlights Sales growth 86.9 % Cash conversion momentum ratio of Market share Cash available gains R2.8bn with zero debt* Record Improved GP and Positive HEPS growth, operating profit operating margins double digit growth in H2 level 27 *Excluding S88
Slide 28: Value Creation: Strategy & Outlook
Value Creation Strategy & Outlook 03 BY MA RK B LAI R - CE O
Slide 29: Strategy Framework
Strategy Framework ST RAT E GIC O U TC OM ES Surprise and delight our customers People | Operations | Sustainability 1 3 5 Profitable • Growing comp sales Diversified • Omni-channel Operational • Digital & tech FRO NTLINE modernisation E NA BLE RS market • Space growth offering • Differentiated fash
Slide 30: Profitable Market Share: Sales Growth Momentum
Profitable Market Share Sales Growth Momentum Sales growth RLC A PPA RE L S EG M E NT % Sales growth ahead of the market since July 2023 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar FY2023 FY2024 Rest of market MRPG apparel segment* HOM E WA RE S EG M E NT % Sales growth converging wi
Slide 31: Profitable Market Share: Market Share Gains
Profitable Market Share Market Share Gains Group market share RLC* Key focus areas Group Retail Directors in place to: +110 • Focus on core operations • New store, category and channel opportunities +60 • Extract value from recent acquisitions and current organic opportunities +10 bps -90 Q1 Q2 Q3 Q
Slide 32: Profitable Market Share Gains Continued
Profitable Market Share Market Share Gains Continued Group market share Stats SA* 16.6% % 15.1% 14.2% 13.8% FY2021 FY2022 FY2023 FY2024 32 *Type D retailers: includes all trading divisions
Slide 33: Profitable Market Share: Organic Growth Progress
Profitable Market Share Organic Growth Progress • 31 standalone stores • 41 standalone stores • 14 new stores in FY2024 • 30 new stores in FY2024 • 70bps market share gain (RLC) • 80bps market share gain (GfK) 33 Both concepts new store returns above internal thresholds and at multiples of WACC
Slide 34: Customer Obsessed: Brand Power
Customer Obsessed Brand Power Top of mind awareness supporting market share gains Highest brand equity #1 coolest clothing store in SA in apparel and homeware segments in SA #1 Most loved Further strengthen our dominant market position via focus on: apparel and homeware • Leveraging brand strength b
Slide 35: What value means to our customers
What value means to our customers Brand Power c e Pri Qu ali ty Exp erie nce hion Fas Convenience 35
Slide 36: Customer Obsessed: Customer Relationships
Customer Obsessed Customer Relationships Digital platforms drive engagement and customers to our stores 67% of Mr Price Apparel shoppers use social media to help decide where to shop Website traffic increased by 14.3m, up 12% 6.9m 60% 2.8m 27% 874k 224% 86% of website traffic 533k 436% is from mobil
Slide 37: Diversified Offering: Omni-channel Champions
Diversified Offering Omni-channel Champions Total owned stores Online SA consumers continue to favour the convenience of omni-channel shopping: 2 900 2.1 % contribution to total retail sales 59 % of website and app users research online and shop in store Enhance performance of profitable online chan
Slide 38: Differentiated Fashion Value: Apparel
Diversified Offering Differentiated Fashion Value A PPA RE L Private label fashion Brand partnerships Brand exclusives 38
Slide 39: Differentiated Fashion Value: Homeware
Diversified Offering Differentiated Fashion Value HOM E WA RE Private label fashion Brand partnerships Collaborations 39
Slide 40: Diversified Offering: Value Positioning
Diversified Offering Value Positioning #1 Fashion Value Matrix Mr Price leads the fashion value matrix ahead of Shein FASHION-VALUE and all other competitors in ladies and mens wear (Borderless Access) Mr Price FA SHI ONA BILITY 92 % Edgars Shein Ackermans of customers recognize Woolworths that Mr P
Slide 41: Scalable Opportunities: Shaping Strategy
Scalable Opportunities Shaping strategy Apex strategy team established in 2019 Researched SA market in 2020 to identify growth opportunities Launched new group strategy in 2021 • FY2024: Acquired Power Fashion, Yuppiechef and Studio 88 - Sales: R10.7bn | + 53.3% - Op Profit: R977m | +34.9% Organic g
Slide 42: Operational Excellence: Disciplined Execution
Operational Excellence Disciplined Execution Centres of Excellence • Execution of People strategy resulted in Top Employer certification • Stakeholder engagement scores improved on prior year and better than competitors • Centralised real estate team delivered >300 projects, increase in capital cost
Slide 43: Operational Excellence: A Data Led Business
Operational Excellence A Data Led Business BU S IN E S S I NTE LLIG E NCE : A I / M ACH IN E LE A RN ING ROBOTIC PROCE S S AUTOM ATION : • Built an enterprise cloud data warehouse • Built and deployed automated engines for • Focussed on automating tasks within to serve reporting requirements using b
Slide 44: Operational Excellence: Acquisition Integration Progress
Operational Excellence ACQU I S ITION INTEG R ATION PROG RE S S - Progressed integration of People related functions - High Jump Warehouse Management system implemented - Aligns to group supply chain blue print - Enables future growth - Leverages lower cost to serve - Appointment of Managing Directo
Slide 45: Top Quartile Returns: Capital Allocation
Top Quartile Returns Capital Allocation Stronger cash Continually assess generation - improved Investment aligned Allocate cash to highest share buybacks and trading performance and to strategy return opportunities dividend policy working capital 45
Slide 46: Top Quartile Returns: Leading Metrics
Top Quartile Returns Leading Metrics Key operating metrics FY2024 FY2023 Medium-term target RETURNS ROE 23.3% 24.8% 24% - 26% ROA 11.7% 12.5% 12% - 14% Dividend payout ratio 63.0% 63.0% 63.0% CASH GENERATION Cash conversion ratio 86.9% 82.0% >80.0% Stock turn 3.1x 3.4x >4.0x PROFITABILITY Gross prof
Slide 47: Outlook
Outlook • Subdued trade in April and May FY2025 - Contraction in economy: Q1 2024 - School holiday shift: April into March Group continued to increase market share in April +80bps - Late onset of winter • June performing strongly with arrival of winter - Group sales growth Q1 FY2025 to date +4.4% (b
Slide 48: Appendix
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Slide 49: Space Growth
Space Growth W.avg net growth Divisions Store Movements Closing stores (m2) 12 9 36 630 4.0% 3 4 1 14 266 0.9% 2 6 8 175 2.0% (5 trading chains) 23 88 890 116.6% 295 18.4% 2 3 35 229 5.0% 3 5 5 16 354 1.9% 5 21 5 20 77.9% 6 41 288.5% 1 30 Total store movements Total Net growth Stores 40 19 19 238 2
Slide 50: Earnings & Dividend Per Share
Earnings & Dividend Per Share FY2024 FY2023 % Growth Profit attributable to shareholders (R’m) 3 280 3 115 5.3% W. Avg shares in issue (000) 257 016 257 274 Basic earnings per share 1 276.2c 1 210.7c 5.4% Addbacks (R’m) 26 (13) Headline earnings (R’m) 3 306 3 102 6.6% Headline earnings per share 1 2
Slide 51: EBITDA Reconciliation
EBITDA Reconciliation FY2024 FY2023 % Growth Profit from operating activities 5 307 4 920 7.9% Total depreciation & amortisation 2 919 2 326 25.5% EBITDA 8 226 7 246 13.5% 51
Slide 52: Group Sales Growth Drivers
Group Sales Growth Drivers Geography Tender Type RSA Rest of Africa Cash Excl S88: 7.0% Credit +15.5 % +25.4 % Cash +18.3 % +1.7 % % of sales 92.2 % % of sales 7.8 % % of sales 88.9 % % of sales 11.1 % Bricks Online 88.9 % Units RSP Excl S88: 4.8% inflation of sales +16.6 % -2.2 % +3.8 % +12.2 % % o
Slide 53: Rest of Africa
Rest of Africa Total % of group sales FY2023 7.2% FY2024 7.8% No. of stores Corporate owned stores 235 Franchise 8 243 3 Ghana Kenya 13 Zambia 15 Mozambique 11 Sales growth (ZAR) Botswana 63 80 Namibia FY2024 Excluding S88: 10.1% +25.4% Eswatini 26 Lesotho 24 53
Slide 54: Thank you
eT a AT DE | _ Thank you