MRP delivered good results for 1H26 in a challenging market, with dHEPS increasing by 6.4% y-y. Turnover growth in its Apparel division was driven by Power Fashion (+10.2% y-y) and MRP Sports (+9.3% y-y). The core MRP Apparel chain recorded soft growth of 4.0% y-y, which is a concern given its significance to the group. Studio 88 also had underwhelming sales growth of 5.5% y-y (on space growth of 6.1% y-y), and we think it may be in a mature growth phase. The slowdown in Studio 88 may have reduced the GPM dilution from this lower-margin branded business. Although Homeware sales growth improved to 5.1% y-y in 1H26, it follows three years of low and contracting top-line expansion. MRP Home continues to lose market share, but management is comfortable with pursuing only profitable market share.
While MRP’s inventory growth seems reasonable at 4.4% y-y, its prior-year stock level was elevated and stock days have nearly doubled since 1H22. Despite the elevated stock levels, its provision dipped to 5.9% in 1H26, and we see a risk of inventory overhang, potentially leading to higher markdowns.
The valuation of Studio 88 has increased to R8.6bn (+13.3% y-y), and we estimate that the remaining 15% to be acquired in March 2026 could cost MRP R1.3bn, bringing the total purchase price of Studio 88 to R5.8bn.
Management seems to be preparing the market for an upcoming offshore acquisition. We believe MRP’s lack of offshore exposure and its focus on the local market are strategic advantages. SA retailers have struggled to expand in both developed markets and in some emerging markets in Africa. While the latter carries higher political and currency risks, we believe its demographic growth advantages more than compensate for this in the long run.