If social media users had their way, there would be a Mr Price Airline.
Howick resident Mbaliyezwe Ndlela designed logos for all the goods she thought Mr Price should sell and tweeted the imaginary product ranges in a post that captured more than 13,000 Twitter likes.
Brands included MRP Food, MRP Property and MRP Car. Ndlela was "surprised" when the spontaneous post went viral, she tells the FM. (Her social media followers requested an MRP Liquor and MRP University.)
On Instagram, meanwhile, user Kim Pienaar’s request for the retailer to start a political party ("You have proved you won’t rob us") was picked up by CEO Mark Blair at the half-year results presentation.
What the debt-free retailer has chosen to invest in is not, unsurprisingly, an airline or opposition party, but Power Fashion — a low-cost clothing chain that will set it back about R1.7bn. In terms of business culture, the two fit "like a glove", says Blair.
Like Mr Price, Power Fashion is headquartered in Durban and its 170 branches in Eswatini, Lesotho and SA sell clothing at prices about 30% lower than Mr Price’s.
Power Fashion was not "a Covid fixer-upper", says Blair. Mr Price will leave the senior management team alone to get on with it. "If you have a capable team, let them be."
In fact, Mr Price has sold excess clothing stock to Power Fashion in the past, according to Anchor analyst Stephán Engelbrecht.
Power operates in the same market as Pep, which Mr Price is clearly challenging head-on with its decision to launch a new range of baby clothes and generic schoolwear.
Pep dominates the R3.4bn baby clothing market and it will need to keep a close eye on its new rival, which has succeeded in growing low-cost brands such as Sheet Street — where sales rose 17.6 % between May and September.
Nic Norman-Smith, commercial MD of LanciaConsult, says Mr Price is clearly expecting consumers to spend less, so buying into a low-cost retailer is "a smart option". "It’s a logical conclusion that as the environment worsens, further downtrading will occur."
The fashion retailer certainly didn’t hold back in describing a bleak outlook for SA, where unemployment is at a 17-year high and confidence is stuck at its lowest level in 35 years.
The company estimates it lost R1.8bn in sales after stores were closed during the April lockdown, while for the interim period as a whole, revenue dropped 14.4% to R9.2bn and headline earnings were down 24.8% to 333.5c a share.
The results also give a good bird’s-eye view of how Covid-19 affected consumers and business. The retailer was able to use "slightly less labour" in stores, says CFO Mark Stirton. Employment costs were down 18.3%, aided by the government’s temporary employer/employee relief scheme.
Cash sales account for 85.4% of total sales at Mr Price, but its credit sales still dropped 27.3% between April and September. And it increased its future provisions for unpaid accounts from 10.4% in March to 15.2%.
Business, however, wasn’t as bad as anticipated and despite the lockdown challenges, Mr Price got a lot right. It appears to be hitting the mark with its fashion again, after 2018’s unpopular ranges led to stock surpluses that had to be disposed of at low prices.
Merchandise gross margins that dropped to 40.8% last year are now back at 43.2%.
Mr Price got its "groove and mojo" back, Stirton says.
That’s also clear in its share price performance this year.
Though 9.5% down year to date, the stock has rallied 34% in the past month alone.
Compare that with Truworths’ year-to-date fall of 20.5% and Pepkor’s 18.8% decline and it seems the market is again warming to Mr Price.
The retailer also negotiated lower rentals after "robust discussions" with landlords. And it has gained some of Edcon’s previous credit customers, who have better credit scores than its usual base.
As for online, sales grew 71.5% and now account for 2.5% of the total, from 1.5% previously. Mr Price sees this, along with its extended larger-size clothing options, year-old Scarlett Hill make-up range and cellular phone sales, as areas of growth potential.
As much as the airline jokes continue on social media, Mr Price ain’t flying anywhere. Close to 93% of the business is based in SA and "we don’t need to take a risk in foreign markets", says Blair.
Its caution has also paid off in a vast cash pile — R6.4bn — which it will use to buy back shares and pay an interim dividend of 210.1c.
Some of that money will also be used on store upgrades. Blair says: "Generally, I’m feeling that we do wait too long for store revamps … I guess the customer feels a bit disrespected in terms of the overall experience."
Social media users still joke about their own business plans for Mr Price. Nontshi Shange tweets: "Mr Price sells reading glasses now? We’re one step closer to property, guys."
But given that it took the retailer 24 years to make a single acquisition, the twitterati might be disappointed.
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