Mr Price Upbeat as Online Sales Shoot Upwards

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Author: Fin24

Mr Price’s online sales have continued on a sharp upward trajectory, contributing to a marked year-on-increase in overall earnings, the group has said.

Mr Price recorded 7.4% growth year-on-year in retail sales and other income, to R7.4bn, during the first four months of the financial year ending 30 March 2019, it said in a statement on Thursday.

Online sales recorded strong growth during the period, Mr Price said, increasing by 28.1% to 83.2m. The MRP Apparel online channel achieved sales growth of 37.6%, while MRP Home saw 19.5% and MRP Sport saw 31.3%.

Cellular and mobile revenue, meanwhile, increased 56.7% to R196.5m, which Mr Price attributed mainly to the ongoing roll out of in-store cellular kiosks.

Total retail sales, including sales to franchisees, of R6.9bn were 6.5% higher than the corresponding period in the previous year.

Group cash sales increased 7.0%, constituting 82.9% of total sales and credit sales reflected growth of 4.1% Mr Price said.

South African sales increased 6.4% to R6.4bn, while sales in non-South African corporate-owned stores grew 9.1% to R520.8m.

This growth was helped along by the inclusion of previously franchised Kenyan stores from late May 2018, Mr Price said.

Excluding Kenya, corporate-owned store growth was 1.8%.

Sales to franchisees decreased 30.9%, the company said, although excluding Kenya, sales were up 11%.

New store openings and expansions meant weighted average trading space increased by 3.1%, though after store closures and reductions were taken into account, net weighted average trading space was up 1.8%.

Other income grew by 23.5% to R459.4m, while debtors’ interest and fees grew 6.9% to R160.1m, with insurance revenue of R85.5m increased to 6.9%. Other sundry income increased 2.8% to R17.3m.

Retail selling price inflation, including the impact of product mix changes and lower markdowns, was 4.2%.

“The retail environment is expected to remain highly competitive until more robust economic growth is attained in South Africa,” the statement said.

“In addition, international trade wars have weighed down on emerging markets. Navigating the impact on consumers of a stagnant economy and a weak ZAR/USD exchange rate is a top priority and we are confident that our fashion, everyday low-price business model is well-positioned to offer great value to customers under these constrained conditions.”

Mr Price shares [JSE: MRP] were trading at R239.47 at 10.24 on Thursday morning, down 0.12%.

Is Athleisure Killing Denim?

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Author: Marjorie van Elven       |

Last week, VF Corporation decided to spin off its denim brands Wrangler and Lee, forming two separate, independent companies. While VF said the new company, yet to be named, has significant potential for growth, market analysts quickly attributed the move to declining denim sales, with many of them saying leggings and yoga pants were to blame for the fall of the two American heritage brands.

Last year, for the first time in US history, imports of elastic knits (leggings, yoga pants and the like) exceeded those of blue jeans, according to the US Census Bureau. Elastic knits imports went from 50 million pairs in 2010 to 200 million in 2017, an average growth of 25.7 percent each year, while denim imports declined an average of 3.9 percent each year over the same period.

Athletic wear is one of the fastest growing segments in the US apparel industry, rising an average of 7 percent a year, compared to 1 percent of the apparel sector in general, according to Wells Fargo. Today, athletic wear represents 30 percent of the US clothing and footwear industry, with 48 million dollars in sales last year alone, as stated by The NPD Group.

 

‘Innovation is essential for denim’

But don’t light a candle for denim just yet. While athleisure is still going strong, it seems unlikely that the category maintains such meteoric growth. It remains to be seen whether leggings and yoga pants are to achieve the same longevity denim has. Remember Lee dates back to 1889 and Wrangler was founded in 1947.

In fact, denim might make a comeback sooner than many think. PVH, owner of brands Calvin Klein and Tommy Hilfiger, for example, said the jeans category has shown “incredible improvement” last year. Levi Strauss & Co reported an 8 percent increase in revenue in 2017 — its strongest growth since 2011.

Levi’s growth may be partially attributed to the company’s decision to accompany the times. Over the last two years, the brand has launched a stretchier version of its iconic 501 jeans (looking to please the legging fans), collaborated with Off-White’s Virgil Abloh, and even experimented with sneaker drops.

According to The NPD Group, innovation is essential to denim. “How many more of the same style jeans do women need?”, wrote Marshal Cohen, NPD’s Chief Industry Analyst, on its report about the denim industry. “The denim market needs to find ways to break consumers of comfortable shopping habits with new product offerings that are worthy of both the change and the spend, ultimately driving the market forward into its rightful place of strength”.

Photos: courtesy of Lululemon, Levi’s Facebook

How do Females fare in the SA Retail Market?

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Author: Eben Esterhuizen

 

While we focus on women in South Africa during the month of August and honour our constitution for declaring the 9th of August a public holiday, retailers continue to look closely at the overall economic status of women.

How liquid is the average women consumer? What does she buy? Does she have the buying power in a household and what does that household look like?

Customer behaviour should drive retail

Segmenting customers, particularly women, in a country as unequal and diverse as South Africa is far from simple, in fact, the data specific to the FMCG female customer is sparse.

This is felt in the retail detail and shopper marketing spheres, as Liezel Matthee, head of analytics and consulting at IRI South Africa notes: “In South Africa, we have found that retailers and manufacturers are extremely good at measuring results, but not as good at measuring the drivers. Shopper data drives all the results that we’re measuring – it tells us the ‘why’.”

How are women in South Africa doing?

Out of South Africa’s 57.7 million people in 51% are female. And women live, on average, six years longer than men, with a life expectancy of 67.3 years compared to 61.1 years for men.

Stats SA’s article, How do women fare in the South African labour market? notes, “The rate of unemployment amongst women was 29,5% in the second quarter of 2018 compared with 25,3% amongst men.”
They state that women are more likely than men to be involved in unpaid work and of the informal sector (which accounts for 17,4% of total SA employment) 47,6% are women compared to 30,6% of men. Clearly, times are tough.

Spending overview

South Africa’s Gross Domestic Product (GDP) was worth $349.42 billion in 2017 (substantially up from $295.76 billion in 2016) and consumer spending in South Africa increased to R1,936,072 million in the first quarter of 2018 from R1,928,878 million in the fourth quarter of 2017. But, employment growth slowed in the first quarter of 2018, with most of the limited job creation happening in the informal sector.

Household consumption

On average a South African household will generally consist of three to four people and have an income of R138,268 per year, with an annual expenditure of R103,293. Male-headed households have a higher average annual income than their female counterparts – R165,853 and R98,911 respectively – and therefore, have greater spending power than female-headed households.

Other statistics to bear in mind are that South Africans spent R31,900 per second in retail stores in 2017 and of our population of over 57 million, just under 31 million people are currently using the internet.

Women earn less but pay more

In a recent survey done by Sanlam some interesting findings emerged with regards to women’s regular spend; the stats aren’t conclusive, but indicative, as Danelle van Heerde, head of advice processes at Sanlam Personal Finance says, “To drastically oversimplify the situation, women are generally earning less and paying more.”

In the survey, 98% of women say they spend more than R100 on monthly toiletries and only 23% of men do. Some of the items listed are:

• Basic toiletries
• Grooming products
• Medical screenings

Of the 500 women and 500 men surveyed, additional findings include:

• Women spend over R1,500 a year on medical screening, versus only 1.2% of men.
• The majority of men, at 56.4%, spent nothing on contraceptives.
• 51.2% of women purchased contraceptives monthly, with 30% of them spending more than R100.

The suggestion by Sanlam was that these discrepancies between spend came down to “pink tax”, which is gaining traction through the #Axethepinktax movement.

The future

According to Gareth Paterson, Nielsen retail vertical lead, South Africa has added 100,000 new traditional trade (e.g. spaza) and modern trade (hypermarkets, supermarkets) stores to its retail world in the last two decades.

Nielsen describes the growth of the spaza shop as “exceptional”, with an increase from 45% to 53% of South African modern trade shoppers (2015 vs. 2016) who now also utilise spazas. Since women are the majority of people occupying the informal sector it would add up that they are the ones predominantly shopping at the Spaza shops.

Nielsen also reports that by 2025 the South African population will have increased by 6% (approximately 3 million people) with notable workforce changes because more than 4.3 million women will have entered the job market by then. With this in mind, retailers need to be prioritising product, price and ease of purchase for women who will be even more prominent when making purchasing decisions in the future.

As retailers, it would be prudent for us to get to know the different types of female consumer better – from the estimated 11.5 million people who are part of a stokvel to the other end of the spectrum, the woman heading towards a totally online shopping lifestyle and those in between. One thing we do know for sure is the future of South Africa is young and female and that’s an exciting prospect for the local FMCG space.

Author: Eben Esterhuizen