Film News South Africa

Rugby backer Mr Price looks south

Clothing and furniture retailer Mr Price is considering expanding into New Zealand and Australia through a “no risk” franchise model, adding to its brand profile there thanks to its sponsorship of rugby teams.

Mr Price said it had passed R7bn in revenue for the first time, reaching R7,4bn in the year to March, a 19% increase. Operating profit grew 17% to R716,2m, and headline earnings per share improved 14% to 219c.

Joint chairman Stewart Cohen said the group had been considering going to Australia and New Zealand for some time as they shared seasonality and a similar lifestyle with SA.

Group sponsorship of rugby teams in the Super 14, which is played between provincial teams in SA, Australia and New Zealand, had given it brand recognition in these countries. Mr Price is the main sponsor of the Sharks rugby franchise.

Should the group decide to expand, it would follow a franchise model, which reduced risk and meant it would work with local partners. This approach would also not place any strain on head office, he said.

Mr Price was also looking at other emerging markets, he said, but would be cautious. “We've always thought the business could trade overseas and we think we've found the right model.”

Nedcor Securities analyst Syd Vianello said expansion into Australia and New Zealand would be challenging as markets there were competitive. However, Mr Price was likely to be very careful.

New store openings affected operating margin, which fell from 10,1% to 9,9%. CEO Alastair McArthur said stripping out new business in Mr Price Sport, Mr Price Kids, Mr Price Furniture and franchising, the operating margin would have improved 1,5%.

Vianello said the group's results were within half a percentage point of market consensus. Apparel had a good second half, gaining market share as consumers traded down.

However, larger store formats affected homeware and furniture sales figures as sales per square metre did not keep up with rising floor space costs. Operating profit had declined, although revenue was up in this division, he said.

Vianello said the group was expected to have a difficult first half as it was still expanding, which would put pressure on costs. Mr Price's international operations all traded better than it expected.

The company, which opened six new stores on the continent last year, has franchise stores in Zambia, Mozambique, Ghana and Kenya. The stores were profitable within the first full year of operation.

The group plans to open another 15 franchise stores in the next financial year, including a pilot of the Mr Price Home format in the Middle East.

Source: Business Day

Published courtesy of

Let's do Biz