Mr Price (MRP) – Understanding the growth drivers

MRP’s acquisitions over the past three years have made an assessment of its traditional chains – Mr Price Apparel, Mr Price Sport, Miladys, Mr Price Home and Sheet Street – more difficult. We unpack the results and find that the traditional chains have had modest top-line growth despite considerable space expansion over the past nine years. We also calculate the chains’ trading densities (which MRP stopped disclosing from FY22) and find evidence of flat or declining results. These trends are surprising, considering the weak macroeconomic environment over the period, which should have supported value retailers such as Mr Price.

We assess the acquired businesses and show the impact of the 600bps difference in OPMs. Management is working on initiatives to exploit scale opportunities, but we believe these may be limited considering the divergent business models of the companies.

We note that Studio 88’s excellent 10-year growth period before MRP acquired it has slowed from a 21.4% sales CAGR in 2011-21 to a 10.8% CAGR over the past three years.

Power Fashion’s top-line growth has mostly been driven by new store rollouts, but we find that trading densities have fallen. We think the larger size of new stores (averaging 529m2 in FY24, compared to 367m2 for the original chain), may be contributing to the lower densities.

Yuppiechef’s sales increased at only a 4.3% CAGR over the past two years, despite its store base rising from seven stores to 20. We think its customers may simply be switching from online to in-store shopping, which might be hurting its profit model.