Executive Summary

In this report, we revisit the voluntary trading update for 1Q26 (13 weeks ended June 2025) for MRP, released in July 2025 and where this positions our view in context.

Financial results at a glance:

·        During 1Q26, group retail sales were up 6.3% with LFL sales growth up 3% and market share gains of 10 bps were recorded during the period (Retail Liaison Committee; MRP SENS), confirming our outlook of continued long-term growth.

·        Looking at recent retail sales growth on a more detailed level, we believe current sentiment to be too pessimistic at this point in time as growth continues with retail sales in April and May 2025, up 11.3% and 11.9% respectively with a 20-bps market share gain. Retail sales in June 2025 however, declined by 5.1% against a strong 12.7% growth in the prior year. This however might be impacted by seasonality such as school holidays and base effects and only represents one month. Therefore, the market might be placing too much weight on this single data point.

·        South African retail sales were up 6.0% with LFL sales up 2.6% in 1Q26. Non-South African sales were up 10.4%.

·        Group retail selling price inflation was up 3.1% which we believe to be supportive and low enough.

·        Cash sales (87.5% of sales) were up 6.3%, with credit sales up 6.1%.

·        The Apparel, Homeware, and Telecoms segments were up 6.0%, 6.4% and 12.7% respectively in 1Q26.

Analyst thesis

 
Our recommendation is based on:
•    Trading at historic low valuations, creating an attractive entry point at the moment. 
•    To benefit from an improved economic environment (lower inflation and interest rates) for consumers. 
•    Expect long-term growth and market share gains to continue stemming from organic growth (store growth and subdivision expansions i.e. Mr Price Kids, Mr Price Cellular, etc) along with acquisitions (Studio 88, Power Fashion, etc). This further helped by having low debt levels including when compared to peers.
•    Mr Price has more stable growth compared to peers.
•    Compared to peers, we prefer Mr Price as it is higher quality from a fundamentals perspective due to higher margins, higher and more stable historical earnings growth, while also having lower debt levels. At the same time, it is trading at a lower NTM P:E compared to Pepkor and a similar NTM P:E to Woolworths.