[ad_1]
Price Group CEO Mark Blair says the acquisition of Durban-based fashion retailer Power Fashions fits the group “like a glove.”
Price announced Thursday that it has acquired the family-owned retailer, which currently has 170 stores in South Africa. Stores are typically on Main Street and in community-focused shopping malls, rather than in regional and super-regional locations.
In a statement, Price said that Power Fashion’s “differentiated business model gives the group access to a broader customer base and the opportunity to scale even further.”
The size of the transaction is approximately 4% of the group’s market capitalization of R39.7 billion. The transaction is expected to be completed in April 2021, subject to approval by the country’s regulatory authorities.
Power Fashions is a value-focused and cash-based retailer with its customer base comprised of low to middle income households. In addition to fashion clothing, the company offers cell phone products, household essentials, valuable cosmetics, electricity and “other opportunistic products,” Price said in a statement.
“Power Fashion products are fashionable, but they are not fashionable. It focuses on the deep value segment of the market and its pricing positioning is strongly aligned with its target customer base, ”the group said.
Energy is a high-performance business and is expected to contribute 7% to Mr Price Group’s revenue.
The group says Power’s “strong track record” eliminates the need to implement a turnaround strategy “avoiding the associated administrative distraction and integration costs.”
The group added in a statement that Power’s management team and employees will be transferred to Mr. Price and a new managing director will be appointed.
Speaking at a presentation of the group’s interim results on Thursday, Blair said Power’s strong executive management makes the group comfortable with leaving Power to its own devices, ensuring there are no disruptions to the fashion retailer’s operations. .
Looking ahead, Price remains cautious in the face of continued difficult business conditions related to the current challenges presented by Covid-19.
The pandemic and closure restrictions wiped out R1.8 billion from the group’s sales in April, as its stores were forced to close.
Read: Price’s expected earnings decline worsens
Following the easing of restrictions in July, Mr Price Apparel, Mr Price Home and Sheet Street (divisions representing 83.1% of the group’s retail sales) increased their sales by 4.5%. The group’s market share increased by 100 basis points during the period and, excluding April 2020, retail sales grew by 3.2% (RSA increased by 3.7%), with market share levels in the months between June and September 2020, the highest in three years.
Online sales grew 71.5% from May 2020, representing 2.5% of sales.
The group said clients have a poor appetite for credit and prefer to transact in cash.
This is evident in cash sales, which have grown by 6.4% (representing 85.5% of total sales), while credit sales decreased by 12.1%.
“The credit environment remains under pressure. The TransUnion Consumer Credit Index reported that consumer credit health deteriorated again in the second quarter of 2020. The National Credit Regulator’s report noted an increase in account arrears, as well as rejection rates for new accounts hit an all-time high, ”Price said.
Its overall earnings per share fell to 333.5 cents in the 26 weeks ending Sept. 26, from 443.2 cents a year earlier.
The group will resume dividend payments at a 63% payout rate and has declared an interim dividend of 210.1 cents.
