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Mr Price’s focus on the bottom end of the retail market helped it withstand a tough economic climate and lift profit 15 percent to R551 million in the year to March.

May 29, 2008

By INGI SALGADO

Cape Town – Mr Price’s focus on the bottom end of the retail market helped it withstand a tough economic climate and lift profit 15 percent to R551 million in the year to March.

The group’s retail sales rose 19 percent to R7.2 billion, supporting recent statistics that Mr Price is taking market share from its competitors. Consumers, under pressure to curb spending, tend to shop down during economic downturns.

Mr Price said yesterday that it expected the trend to continue. Chief executive Alastair McArthur said: “Internationally, value retailing has proved to be the best formula for tough trading times and it will help us prosper through the downturn.”

Rob Forsyth, the head of industrials at Investec Asset Management, said that of the retailers listed on the JSE, Mr Price and Truworths were probably the best placed to withstand the downturn.

Global trends showed that in difficult times the value-for-money and premium retail segments gained market share at the expense of the middle ground, Forsyth said

McArthur said: “The buoyant economic environment that has been enjoyed by retailers in recent years has ended.

“We are trading in difficult times, which are likely to get even tougher.”

Decreased spending put a brake on Mr Price’s home division to a greater extent than its apparel division, because of lower sales of durable and semidurable products.

The homes firms, Mr Price Home and Sheet Street, were adapting to the changed conditions. The group said some of the smaller Mr Price Home stores would be converted to other concepts or closed.

Slower sales growth resulted in higher markdowns, which was one of the factors that led divisional profit to plummet 31 percent to R118 million.

Other reasons were the establishment of newer furniture and kids departments, the changed allocation of distribution costs and duplicate charges while moving to a new voice over internet protocol system.

The apparel division, which represents two-thirds of the group’s revenue, performed well, benefiting from the opening of eight new Mr Price express stores, 12 Miladys stores and 15 Mr Price Sport stores. Another eight Mr Price Sport stores are due to open this year.

Mr Price rose 3.12 percent to R16.50. The general retailers index added 0.24 percent.