Mr Price has just posted the kind of sales number retailers dream about: group sales up 45.3% to R13.1 billion in its first quarter, with other income adding a further 12.5% to R352 million. Almost all of that leap came from NKD, the German discount chain it bought earlier this year, which chipped in R3.8 billion of European sales. Strip NKD out, and the picture is far more sober.
The German bet that spooked shareholders
When Mr Price bought NKD, the deal rattled investors, given local retailers' patchy record abroad. This update reads as vindication: NKD outperformed both the wider clothing market and the value segment in Germany, which makes up about 60% of its sales. In Germany it closed 21 stores and opened 23 under a space-optimisation plan, taking its footprint there to 2,156 shops. The market liked the news, nudging Mr Price shares up 2% to R164.50.
At home, the shopper is stretched
Back home, growth was modest. Excluding NKD, African sales rose 3.2% to R9.3 billion, still ahead of the wider market's 0.8%, though comparable store sales were flat. South African sales grew 3.5% to R8.6 billion. Broken down, apparel rose 3.4%, homeware managed just 0.7%, and telecoms was the star with 11.2% growth. Group unit sales edged up 1.7% to 68.7 million, across a footprint that grew to 3,214 stores. The company kept price increases to just 1.5%, "carefully managed to protect the customer value proposition in a rising inflation environment". Consumer confidence slid from -7 to -19 index points as higher living costs bit. Independent analyst Alec Abraham put it bluntly, saying the weak local growth "shows extreme pressure by consumers in the economy". He noted retailers are wary of passing on price rises to shoppers who cannot absorb them, a squeeze he called "clearly unsustainable" for profit margins. Anchor's Steph Erasmus added that Mr Price had shared little detail on NKD, leaving real uncertainty until fuller half-year results in November.
Value retail tends to win when money is tight, and Mr Price is proving it on two continents at once. But investors will want to see the German engine keep running once the full numbers land.
