MRP delivered satisfactory FY26 results, and the focus will now be on integrating NKD, the Eastern European value retailer it acquired. Management’s target of 6.5% p.a. top-line growth to 2030 seems ambitious, considering NKD’s sales expanded at a 3.4% CAGR between FY18 and FY24, and FY25 sales improved by only 2.8% y-y.
NKD’s GPM uplift from 56.7% to 64.5% over the past three years is remarkable for a low-cost, value retailer. It does raise concerns about the sustainability of the improvements, given that most of the uplift occurred while the business was presumably being prepared for sale.
Management is targeting an EBIT margin of 8-10% by 2030, and given that its GPM is already above the target range of 62-64%, the OPM goal will require NKD’s expense-to-sales ratio to fall to around 56%. We question whether this level of expenses can be achieved in the high-cost-to-operate European markets. Moreover, NKD runs small stores averaging 300m2, which are less efficient and have a higher expense-to-sales ratio than large-format stores. We find its trading density is even lower than MRP’s Power Fashion chain, which may explain its low EBIT margin.
The final 15% stake buyout of Studio 88 minorities, at R1.7bn, suggests that this division’s EBITDA surged by 29.6% y-y in FY26, on turnover growth of c. 7.3% y-y. This implies that the rest of the MRP Group’s EBITDA may have declined by 1.9% y-y.