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Mr Price acquires family-owned Power Fashions

Online and cash sales grow, credit sales down 12.1% for the 26 weeks to September 26.
Image: Supplied

Mr Price Group CEO Mark Blair says the acquisition of Durban-based fashion retailer Power Fashions fits the group “like a glove.”

Mr Price announced on Thursday that it acquired the family-owned retailer, which currently has 170 stores across Southern Africa. Stores are typically on the high street and in community-centred malls, rather than in regional and super-regional locations.

In a statement, Mr Price said Power Fashion’s “differentiated business model gives the group access to a wider customer base and the opportunity to significantly scale further.”

The size of the transaction is approximately 4% of the group’s market capitalisation of R39.7 billion. The transaction is expected to be completed in April 2021, subject to approval from the country’s regulatory authorities.

Power Fashions is a value-focused and cash-based retailer, with its customer base consisting of low- to middle-income households. Apart from fashion apparel, the company offers cellular products, basic household items, value cosmetics, electricity and “other opportunistic products,” Mr Price said in a statement.

“Power Fashion merchandise is fashionable, but not fashion forward. It focuses on the deep value segment of the market and its price positioning is strongly aligned to its target customer base,” the group said.

Power is a high-performing business and is expected to contribute 7% to the Mr Price Group revenue.

The group says Power’s “strong track record” eliminates the need to implement a turnaround strategy “avoiding the associated management distraction and integration costs.”

The group added in a statement that Power’s management team and employees will be transferred to Mr Price and a new managing director will be appointed.

Speaking at a presentation of the group’s interim results on Thursday, Blair said that Power’s strong executive management makes the group comfortable with leaving Power to its own devices, ensuring that there are no disruptions in the fashion retailer’s operations.

Looking forward, Mr Price continues to be cautious of continued tough trading conditions relating to the ongoing challenges presented by Covid-19.

The pandemic and the lockdown restrictions wiped R1.8 billion off the group’s sales in April, as its stores were forced to close.

Read: Mr Price’s expected earnings slide worsens

Following the easing of restrictions in July, Mr Price Apparel, Mr Price Home and Sheet Street (divisions representing 83.1% of the group’s retail sales) grew sales 4.5%. The group’s market share increased by 100 basis points over the period and excluding April 2020, retail sales grew 3.2% (RSA up 3.7%), with market share levels in the months between June to September 2020 the highest in three years.

Online sales grew 71.5% from May 2020, accounting for 2.5% of sales.

The group said customers have a low appetite for credit, preferring to transact in cash.

This is evident in cash sales having grown by 6.4% (accounting for 85.5% of total sales), while credit sales decreased by 12.1%.

“The credit environment remains under pressure. TransUnion’s Consumer Credit Index reported deteriorating consumer credit health again in Q2 2020. The National Credit Regulator report noted a spike in account arrears as well as the rejection rates on new accounts reaching an all-time high,” Mr Price said.

Its basic headline earnings per share fell to 333.5 cents in the 26 weeks ended September 26, from the 443.2 cents a year earlier.

The group will resume dividend payments at a 63% pay-out ratio and has declared an interim dividend of 210.1 cents.

Mr price share price over 6 months

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