Split and Polish: Mr Price eyes offshore prize
mrpHome store to open in Poland by the end of 2018
Mr Price plans to enter the Polish market by November – its first foray into the northern hemisphere.
The group will join a handful of other JSE-listed property and retail companies with a presence in Poland, which is eastern Europe’s biggest economy.
Steinhoff’s Pepco has found success in that market, Spar Group is in discussions on a potential acquisition there, while property counters including Echo Polska Properties, Growthpoint and Nepi Rockcastle have interests in Poland.
Mr Price CEO Stuart Bird said on Friday the retailer would open a test mrpHome store in Poland in late October or early November.The country was attractive because of its growing middle class and healthy economic growth prospects, Bird said.
Testing the market with a mrpHome brand was easier than using an apparel store, as the latter would involve “seasonal complications”.
Mr Price tends to take a circumspect approach when entering new markets. In 2003 the retailer closed six test stores in Chile, while it is testing mrpHome and apparel stores in Australia. The group has consolidated its three apparel stores in Australia into one.
“They have taken a very conservative approach to store rollout in Australia and we expect to see something similar with regards to Poland,” said Bjorn Samuels, an equity analyst at Argon Asset Management.
“While we question all the recent Polish and other eastern European acquisitions or expansion plans by many JSE-listed companies, we believe that a low seasonality mrpHome pilot store in Poland provides Mr Price with a low-risk entry point into a high growth European economy with positive fundamentals,” Samuels said.
Bird said Mr Price would also refocus on its rest-of-Africa operations after “addressing” the South African business.
It would venture into new territories and planned to open a test Sheet Street outlet in Zambia, he said.Mr Price said on Friday its revenues rose 8% to R21.3-billion in the year ended March, while profits after tax climbed 22.9% to R2.8-billion.
While Bird said this was “a solid performance”, he said trading conditions in the group’s home market were expected to remain tough in the new year to March 2019.
“We certainly don’t expect buoyant trade this year. GDP growth is still going to be pretty subdued.” Mr Price would focus on improving margins, he said.
Bird said Mr Price was likely to spend R550-million on capital expenditure in the new financial year. It bought 12 Kenyan franchise stores in May and would open about 48 new stores through the year.
Vestact portfolio manager Byron Lotter said while Mr Price had been “in disarray” two years ago, management had steadied the ship. “They managed to get it together, rebound and continue to lead the South African clothing market. As a shareholder, the very worst thing to have done would have been to sell during the turmoil,” Lotter said in a note to clients.