Mr Price Group Limited (JSE: MRP) encountered challenges in the first half of the fiscal year due to power cuts, heightened promotions, and constrained spending, resulting in a decline in diluted headline earnings per share (HEPS) by 9.6%. The company’s revenue, buoyed by acquisitions, notably increased by 26.4%. Despite the dividend reduction by 9.3% to R2.84 per share, the payout remained stable at 63% of earnings. The recent performance saw improved November sales, contributing to a surge in the share price by 11% as the market reacted positively to the better-than-expected profit.
Mr Price’s management foresees an enhanced second-half performance, notably during the holiday season. Despite challenges in the first half, including power disruptions and promotional pressures, the company maintains an optimistic yet cautious outlook. The management anticipates an upturn in sales trends and gross profit margins in the latter half of the fiscal year, aiming to protect margins by refraining from extensive promotions during the crucial holiday quarter.
Technical Analysis:
Trading at R155.08, Mr Price Group’s share price exhibits stability, consolidating around the ascending channel pattern following a successful earnings-induced breakout above the channel. The current price is above the 50-SMA (blue line), 100-SMA (orange line), and 200-SMA (red line), with the 200-SMA standing above the 50-SMA and 100-SMA, indicating potential long-term bullish sentiments. The RSI, trending slightly downward at 62.33, implies a nuanced market sentiment.
Short-term trading opportunities towards the R160.98 resistance level could arise if the bullish momentum persists. A confirmed breakout could target the R167.04 resistance. Conversely, a move back into the channel might trigger bearish sentiment, targeting the R148.49 support level. Further downward movement could test the R139.07 support level.
Summary
Mr Price Group Limited faced challenges impacting earnings but demonstrated resilience in revenue growth. The positive reaction in the market signals confidence in the company’s ability to overcome obstacles.
The stock, currently poised around the R155.08 level, indicates potential short-term bullish movements towards R160.98. However, caution is advised, as a reversal into the channel might prompt further bearish momentum towards R148.49, followed by R139.07.
Sources: TradingView, Reuters, Simply Wall Street, Mr Price Limited, PR Newswire, MoneyWeb, BusinessLive.
Piece written by Mfanafuthi Mhlongo, Trive Financial Market Analyst
Disclaimer: Trive South Africa (Pty) Ltd, Registration number 2005/011130/07, and an Authorised Financial Services Provider in terms of the Financial Advisory and Intermediary Services Act 2002 (FSP No. 27231). Any analysis/data/opinion contained herein are for informational purposes only and should not be considered advice or a recommendation to invest in any security. The content herein was created using proprietary strategies based on parameters that may include price, time, economic events, liquidity, risk, and macro and cyclical analysis. Securities involve a degree of risk and are volatile instruments. Market and economic conditions are subject to sudden change, which may have a material impact on the outcome of financial instruments and may not be suitable for all investors. When trading or investing in securities or alternative products, the value of the product can increase or decrease meaning your investment can increase or decrease in value. Past performance is not an indication of future performance. Trive South Africa (Pty) Ltd, and its employees assume no liability for any loss or damage (direct, indirect, consequential, or inconsequential) that may be suffered from using or relying on the information contained herein. Please consider the risks involved before you trade or invest.
