MRP delivered strong FY25 results, and the early momentum in FY26 is encouraging (albeit on a soft base). Our analysis shows that some of the traditional chains have an improved top-line growth trajectory, following an almost decade-long decline in trading densities. We calculate that the traditional chains’ operating margins may have increased slightly, but they remain well below historical margins.
The acquired chains are the main drivers of turnover growth, and this is largely due to aggressive space expansion. We note that Power Fashion’s strong 14.1% CAGR in sales over the past four years was outpaced by its space expansion (17.6% CAGR), resulting in declining trading densities.
The momentum in Studio 88’s top-line growth seems to be slowing, and we think it could be showing signs of a mature growth phase. However, the buy-out price of the minority stakes implies that Studio 88’s EBITDA increased by a strong 13.3% y-y in FY25. It also means the residual businesses in MRP increased their EBITDA by a modest 6.8% y-y.
MRP’s cash rose to R4.1bn in FY25, but taking into account the earlier year-end cut-off, the adjusted balance after month-end creditor payments would be c. R3.2bn, on our estimates. MRP will acquire the next tranche minority interest of 9% for R770m in FY26, and we estimate the final stake of 15% (to be acquired in FY27) could cost R1.4bn. The total cost of the 30% minority stake could be around R2.6bn, compared to the R3.6bn paid for the 70% stake in FY23.