Solid earnings expected from Mr Price

Its PE cautions that the share price is currently trading at a premium to growth rate.

 

Against the backdrop of a pressured consumer environment Mr Price, the value retailer with an affinity for cash, is set to report a solid set of full year results on June 2 2015.

Forward guidance via Sens in the form of a final trading statement has guided the following in terms of the expected earnings.

 

 

 

 

                        Screen Shot 2015-06-01 at 3.28.46 PM

In addition, a final gross cash dividend of 368.5c per share has been declared, bringing the total offering for the year to 580c per share.

The apparel division accounts for around three quarters of group sales. Mr Price clothing is the core of the apparel division and is likely to have performed well over the period for the group to have achieved the 20% odd growth in headline earnings. Mr Price Sport is expected to show steady growth, while Milady’s is expected to show lacklustre growth as was evident in the interim period.

Over the reporting period, the group has been working at growing its online retail business and investors will be interested to see the progress and take-up thereof. In the interim period, online sales of R53 million were realised (group revenue R8.3 billion 1H 2015). Although a relatively small contributor to the overall sales figure (for now), the online retail provides the benefit of increased reach, both locally and offshore, while not incurring the same level of overheads which accompany the growing of a bricks and mortar presence.

The home division, comprising of Mr Price Home and Sheet Street, accounts for about a quarter of group sales, although just over 20% of group operating profit. Mr Price Home is expected to show mid to low double-digit growth in sales from the division, while Sheet Street sales are likely to be more or less in line with inflation (4.5% to 5.5%).

A Thompsons Reuters poll of 12 analysts maintains an average rating of ‘hold’ on the stock. Although the company is achieving a higher growth rate than its apparel sector peers, Mr Price, trading on a historical price to earnings (P/E) ratio of 29x perhaps cautions that the share price is currently trading at a premium to the rate of growth being achieved.

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