Mr Price Group Limited (MRP) Earnings Call Transcript & Summary

Good morning, everybody, and welcome to the annual results presentation of the Mr Price Group and this is for the year ended 30th of March 2024. Just a quick note before we get into the detail. We are reporting a little bit later than usual. And that's not because we had a new CFO in the seat. In fact, Praneel [indiscernible] with [indiscernible]. But that was -- it was really due to the fact that we're going through a mandatory auditor rotation, and we just had to build in a bit of a buffer in case anything came out of that process, and we're glad to report that it didn't. So that's the reason for the delayed reporting. When you look at the presentation itself, I'm just going to talk a little bit about the retail environment that we find ourselves in. Praneel is going to do the deep dive into performance and then we'll look at -- I'll present on the value creation, give some insight into strategy. But of course, a lot of the detail is going to really come towards the end of the year when you have a Capital Markets Day, so that we're going to unpack a lot of these concepts and a lot of the strategic pillars in a lot more detail come September. So just look at the retail environment. And I think I'm not going to talk to all these points, but the main point is there's a lot happening out there. Whether you look on a global front, whether you happen to look at the SA economy and the consumer environment, I think there's a lot of challenges in that process. But I think the key thing for us, we performed well in this environment. Our business model is suited to it. And I think we're poised to really take advantage of any uptick that might come. And one of the points I just want to stress here is we obviously all very expected to see the outcome of the government of National Unity talks. We will -- we expect to hear the outcome in the next couple of days. And I think as soon as you -- as we have that and hopefully, it's a positive scenario for the country, but it's quite remarkable how quickly all these negatives can turn to positives. Some might take longer time because it's dependent on a growth economy, but at least the building blocks will be in place. And maybe who knows, maybe by the time we talk in November, there'll be a lot more positives, certainly in the last 2 columns of this page. When you look at the Mr Price core customer, and this is not our data, it's independent Absa research. And the point I want to make here is that when we've looked at inflation and inflation has been outside the target range for quite some time during the period. But you've got to look at inflation as it pertains to your target customer. So if you just look at that red line for a minute, that talks to -- in this piece of research, inflation at the lower income level. It is quite broadly defined nor to ZAR 46,000, ZAR 48,000 per month. So that's not low income in our view. But certainly, I think the point is well made that inflation has been more impactful to the lower-income consumer than the high end for obvious reasons. Against that quite challenging environment, it's quite -- it's very pleasing to see all the green on this page, and I'll just quickly go through some of the highlights, revenue growth of 15.5%. Obviously, now for the full year, all divisions and all acquisitions have been reported for the full year. But in the base, Studio 88 wasn't in the H1 base. So that's part of the reason for revenue growth been quite strong at 15.5%. We sold just short of 300 million units during the year. We opened up 238 stores. We'll go into a bit about store returns, et cetera. But very pleasingly, still managed to keep focus on SA procurement and we all know the benefits of that brings to the local economy and job creation, and we procured over 100 million units from South Africa. Our market share picked up very nicely. I'll go into a little bit more detail about that. But you can see in H2 that it was up 90 basis points. And it's a really positive story when you're picking up market share like that and then on the next slide, you can see what's happened to our GP percentage and were up 160 basis points in the second half as well. And that's really the desired model. Operating profits were up 13%, HEPS growth was up 17.8% in the second half. And as a consequence, the final dividend is up by the same number as well. This page really talks to just start to give you a little bit more granular information. You can see last year and this year, and you can see the splits between H1 and H2. And on that first column on the revenue, that really just brings out. And you can see in H1, revenue was up 26%, and that was in not in the base, and that's just spoke to that. And then just on the operating profit, although revenue is up significantly, there wasn't -- in H1, it wasn't a corresponding operating profit kick and we've dogmented all those reasons at the half year. But just to remind you that in that period, and this is historically speaking, should at profits in terms of the bulk of their profits actually made in H2, so that was another factor in that. But I think all in all, if you look at all those H2 statistics, they tell a really good story. And I think this encapsulated [indiscernible]. Well, if you look at the -- so what we've done here, we've actually split our revenue growth, our sales growth into H1 and H2. And you can also see the trajectory of the sales per quarter. So over the period, you see generally a nice improving sales momentum. Q1 was pretty tough, but going to Q2 and Q3, up to 9.9%. Q4 was a lot more challenging in the market. But the story for us is that in that cycle, positive for the Mr Price Group, tough market out there but we actually gained market share in 3 of the 4 quarters. And as I said a little bit earlier, we also kicked on in terms of GP performance. This really just highlights the trajectory of some of our divisions in terms of consecutive months market share growth. For the group, it's 7 months. For the Mr. Price division, which is our biggest division by somewhere, 8 consecutive months and Power Fashion, a remarkable 26 months consecutive market share growth. I'll talk to performance after you in shortly, but you can add 1 month to each of those numbers because we continue to gain market share in April, [indiscernible] some of these reasons set out for each of those, the group, Mr. Price and Power Fashion. Right, I'm going to hand over to Praneel now and Praneel is going to take us through the detailed analysis.

Thanks, Mark. And good morning to all our stakeholders joining us online this morning. I'm pleased to present to you the group's operating performance for the year ended 30 March 2024. If you remember, when we met in November last year at our interim results presentation, I spoke to you about the momentum change that we had seen in Q2 of the first half and our expectation that it would flow into the second half of the financial year. I'm pleased to report to you that, that's precisely how it played out. We noted improved sales trends, higher GP and a leaner inventory position at year-end. And now I'll take you through some of the highlights of the trading results. On the first slide, having a look at revenue, retail sales grew 16.2% to ZAR 36.5 billion for the period. As Mark mentioned, that included Studio 88 in the first half, so we've given you a split on the table to the right in terms of the first half and second half performance where you see total retail sales growth in the second half coming in at 8.4% with 90 basis points of market share gains. Comparable sales growth for the period moved from negative 0.8% in the first half to plus 3.6% in the second half. Other income came in at 2.3% growth for the period that was impacted by increased debtors interest and charges and the 50 basis points increase in the repo rate over the year, resulting in a 12.1% increase in debt, interest and charges. However, this was offset by the impact of BI insurance proceeds in the base, which resulted in the total impact of 2.3% growth for other income. Finance income decreased 13% to ZAR 161 million. And I'll talk to you just now on the next slide a little bit more around net finance income. That took the total revenue growth to 15.5% to ZAR 37.9 billion. Moving on to the group income statement now. Revenue at 15.5%, we just spoke about with gross profit growing by 16.8% for the period to ZAR 14.6 billion. I'll talk to you just now around the growth in GP that we've seen across the different sectors, but nice to see the little wedge starting to open up between the revenue growth and the gross profit growth. Expenses grew 20.1% to ZAR 10.3 billion for the year, but that includes Studio 88 non-comp growth and when stripped out results in expenses growing only 7.7% for the year. Profit from operating activities increased 7.9% to a record level of ZAR 5.3 billion for the period. Net finance expenses grew 24.7%. And as I mentioned just now, that was the impact of lower interest earned on the bank account or a cash reserves due to the acquisition of Studio 88 of ZAR 3.6 billion being paid out of cash reserves together with an increase in interest and lease liabilities from the take-on of Studio 88 rental agreements together with the new stores that were opened for the period, 238 in total. That took profit before tax to a 5.9% growth for the period and profit attributable to equity holders of the parent, up 5.3%. That translated into headline earnings per share growth of 6.7% for the year, and a massive 17.8% for the second half. Pleasingly, EBITDA grew 13.5%, up to ZAR 8.2 billion for the year. I thought it was important to also talk to you about the shape of our income statement to further emphasize the benefit of the improved trading in the second half. So the table on the right gives you a view of the profit wedge for the second half, revenue growing by 8.1%, with GP growing at 12.9%. So a nice wedge coming through. expenses at 10.2%, resulting in an operating profit growth of 13.2%. And with decent operating leverage coming through. Moving on to the segmental breakdown. The apparel segment now contributes 79.7% of retail sales, up from 76.8% last year due to Studio 88 not being in the base for the full year last year. Retail sales for this sector grew 20.8% and operating profit up 15.8%. We've also given you some enhanced disclosure around the sales drivers this time talking to comp sales, unit growth and RSP, and you see the kick on in the second half of all of those metrics. We're also very pleased with the sales density of the segment coming in at 37,450 a leading metric in its sector. Moving on to the homeware sector, now contributing 17.1% to retail sales down on last year's 19.9%, obviously due to the shift of including studio into the apparel sector. In this sector, you see retail sales up 0.3% for the year. But if you'll remember, at half year at November, we spoke about H1 retail sales growth of minus 1%, and you see the kick on in H2 at plus 1.4%. That same trend can be seen in operating profits which landed on minus 23% for the period, impacted by minus 34% in the first half, improving to 12.6% in the second half. These metrics confirm management's view that the impact of the structural changes to the segment have now mostly been absorbed and the trends are now improving. With over 30% market share collectively, the 3 homeware divisions provide a healthy platform for incremental growth for the group. Moving over to the Telecom segment, which is really the smallest segment, contributing 3.2% to retail sales, down on 3.4% last year, made up of the Mr Price Cellular brand and the power cell brand. Retail sales up 10.2% and operating profit up 55% for the year, driven by an increase in the organic concept that we had launched the Mr Price Cellular stand-alone stores, which grew by 30 stores during the period. Market share gains in this sector were up 80 basis points according to GfK. Moving on to space growth now. Our portfolio of stores continue to provide above expectation returns and hence continue to be a primary channel for capital allocation. The group added 238 new stores for the period to land on 2,900 stores at year-end. The apparel segment grew by 181 stores with movements in Mr Price and Mr Price Kids concepts by 36 stores. The Power Fashion chain grew by 35 stores and Studio 88 increased by 88 stores across their 5 chains. The Homeware segment grew 27 stores, 16 in the Mr Price Home chain and 6 in the Yuppiechef chain. The Cellular segment grew by 30 new stores, stand-alone formats to 41 by year-end and total locations where all cellular product can be bought now extends to 804, including the store-in-store concept across Mr Price Cellular and Power cell. The key metric for us is the return on operating assets of stores. Obviously, this metric is one that we watch quite closely, and we're very pleased with the outcome of the returns being above more than 2.5x our cost of capital. Net average weighted space growth of 16% for the group for the period and 5.3% up, excluding Studio 88. Quality space, obviously remains highly competitive. However, our group brands are high footfall drivers and this really drives positive engagements with our landlords. Moving on to an analysis of gross profit. You'll note for the first time in the blue block that we've included some enhanced disclosure around GP analysis. This includes medium-term targets that we've defined to be achieved over a 2- to 3-year period. These targets will be assessed regularly by management in terms of reassessing performance for the businesses. But I'm pleased to report that GP for the period ended on 39.7% for the group, 20 basis points up on last year and for the second half at 40.6%, 160 basis points better than last year. The medium-term target in terms of the group GP metrics between 40% and 42% being set. Merch GP increased to 40.5% for the year and 41.4% in the second half. In the apparel sector, GP came in at 40.5%, which was a 60 basis points increase on last year and landed on 41.6% in the second half, right in that medium-term target range. The homeware sector coming in at 40.6% was down on last year, but contributed significantly -- which was contributed significantly by the sectoral discounting in H1 that we spoke about with some margin improvement in H2. The target in the homeware sector at 40 to 42 shows you the opportunity for that change to move into some positive momentum and gain some opportunity in GP. On the telecom sector, we landed at 19.2% GP, more or less in line with last year and in the target range also. Moving on to a view of how all our brands shape up in relation to the medium-term targets. We've given you a view here in terms of how the brands stack up from a GP perspective. The Mr Price Cellular and Telco segment, we said would be a lower GP segment coming in at the under 38% category. The next category, the new businesses, Power Fashion, Yuppiechef and Studio 88 in the 38% to 40% GP range, and then the core Mr Price Group at over 40% includes all the red caps together with Sheet Street and maladies at a higher GP also. Moving on to overhead expenses. This has been an area of significant focus for me in the second half. And you'll note that total expenses grew 20.1% on last year to ZAR 10.3 billion. When stripping out Studio 88, that growth is 7.7%. Employment costs grew 10.9%, excluding Studio 88, and that's really due to the variable performance-linked incentives. As you would have noted by now, significant improvements in performance in the second half would have resulted in performance-based incentives being paid, minimum wage increases of 9.6% at the beginning of the period and the 238 new stores that we rolled out would have contributed to the employment cost increase. Occupancy costs up 22%, driven by weighted average new space growth of 16.4%. Security costs also up 12.8% for the new stores and additional costs incurred for backup power. Also to note that the [indiscernible] electricity increases came in at 18.7% higher, which would have contributed to that cost growth. So generally, the cost of doing business becoming more expensive being felt and seen through our metrics, but also being contained. Other operating costs coming in at minus 2.2% on last year to ZAR 2.2 billion really reflects the stringent cost management that we apply to the businesses. If you will recall in November, at interims, I said that we were targeting an expense to sales ratio of less than 28%. And I'm pleased to report that we delivered 27.3% for the year. Moving on to a view of operating margin. Again, for the first time, we've given you medium-term target ranges across the sectors for operating margin. You will note that the group operating margin came in at 14%, 110 basis points down on last year, but we see the kick on in H2 at 16%, up 70 basis points. The apparel sector came in at 15.3% and the second half, again, momentum of 17.7% due to the recovery in Mr Price and Power Fashion. The Homeware op margin came in at 10.5%, 11.7% in the second half, which was an improvement, but you'll note opportunity for the margin accretion in this chain with the medium-term target set of 13% to 15%. The telecoms op margin ended at 9.8%, 280 basis points higher than last year and within the medium-term target band. On the next slide, you'll see an important view that we wanted to provide to you at this time. We have had significant questions from analysts around how our business shapes up in terms of the new acquisitions and the core business. We've had acquisitions. And we've said over the period that we were anticipating to do these acquisitions at lower margins, knowing that they would dilute some of the group metrics, but also knowing that they would significantly add to the top line and this slide shows you exactly that position. Retail sales over the 6-year period grew from ZAR 20 billion in 2019 to ZAR 36 billion in 2024, a 71% growth over the 6-year period. The solid red line indicates the op margin for group. So you see that coming down over the period. And the dotted red line indicates the op margin of the core group, excluding acquisitions, coming in at just under 16% for F 2024. So we hope this gives you some comfort that the core business is still operating at better average op margins than the total group number. But also know that there has been significant rising costs of doing business over F '23 and F '24 that impacted that op margin. And we've also identified short-term strategies to achieve these targets. So some of the key items that we were looking at, we are looking at to increase margins for the group include higher comp sales strategies, together with the continued disciplined cost management. A big focus for us is extraction of efficiencies and synergies also across the group, which would include appropriate acquisition integration. Group merchandise procurement, which we've started to see benefit of in terms of all our brands, negotiating with suppliers collectively together with supply chain benefits due to the scale of the volumes that the group does across shipping, transport and warehousing. Mark will talk to you about these and give you more color a bit later when he talks to the strategic outcomes section of our presentation. The target medium-term operating margin has been set at the 13% to 15% as we spoke about, which will be reviewed as we get into that upper side of that metric and reset going forward. Moving on to one of my favorite slides in the deck. This slide indicates an independent view of cost operation across our sector compared to competitors. You will see that the Mr Price business operating expenses per square meter is the lowest in the sector compared to our 4 other competitors. Independent research coming through from Investec Equities about 6 or 8 weeks ago. This really is giving you comfort that cost management really aligns with our DNA of every decision, every day supporting our value routes. Moving on to the balance sheet. I think this one slide gives you a really good indication of how things shaped up in the balance sheet, continued strong balance sheet in terms of unencumbered debt. At the half year, we spoke to you about inventories, and we were anticipating tight stock management in the second half, but there was uncertainties due to port challenges, but we're pleased to report that gross inventories ended on minus 4.2% at year-end with stock freshness up at 85.8%, a 240 basis points increase on last year. Trade and other receivables grew 8.6%, and we spoke about debtors interest increasing 12.1% earlier, with trade and other payables coming in at 6.1% growth, continued positive momentum from the supply chain finance program. That resulted in the net working capital generated of positive ZAR 122 million. On the right-hand side, very proud of the zero long-term debt in the business, which continues together with cash and cash equivalents, growing by 94% on last year to end on ZAR 2.8 billion. If you remember, again, at the interim stage, I said that cash generation was a key focus area for me, and we were aiming for a cash conversion ratio of about 80% and I'm pleased to report that we landed on 86.9% from a cash conversion perspective, up 490 basis points on last year. And the cash balance really supports our capital allocation program with all our big investments being supported by cash reserves. Moving over to the next slide, I'll navigate you quickly through the cash flow movements for the year. as the cash balance started on ZAR 1.4 billion at the beginning of the year, significant cash generated from operations of ZAR 7.8 billion for the period, working capital positive movements of ZAR 122 million that we just spoke about, net interest, up ZAR 525 million and tax coming in at ZAR 1.3 billion outflow. Investing activities saw CapEx spend of just under ZAR 1 billion with financing activities giving you an indication of deployment of cash, ZAR 1.9 billion paid out to shareholders in dividends, really talking to our 63% dividend payout ratio with repayment of lease liabilities coming in at minus ZAR 2.8 billion, where the cash balance landed on the ZAR 2.8 billion that we spoke about just now. In terms of allocation of capital on the next page, for the year, we spent ZAR 1.1 billion in terms of CapEx. Most of that CapEx, about 71% was allocated into the store environment, including new stores, expansions, revamps and backup power for stores. Revamps, obviously, were second priority due to backup power allocations acquiring most of that investment. However, revamped strategies will continue in 2025. In terms of the credit growth performance, credit sales ended up 1.7% on last year at ZAR 4.1 billion for the year, contributing 11.1% to total sales. Our conservative credit posture continued with the approval rate at 19.3%, down 370 basis points on last year. A big piece of work that we undertook this last year was to reassess the suitability of our write-off point. As you know, historically, we've been very conservative when it comes to credit, which meant that we wrote off our accounts earlier from a trade debtors perspective, which led to higher post write-off recoveries. During the course of the year, we had done intensive analytics, and we had moved the write-off point out to create a charge-off portfolio on the balance sheet, which then resulted in an increase in the debtors book, as you see, growing at 15% on last year. and also a decrease in net bad debt. So you see the net bad debt percentage of 2.2%, down from 8.4% last year. The increase in the debtors book resulted in an increase in the impairment provision due to the coverage ratio now extending over a higher debtors book and the impairment provision came in at 13.9%, up from 10% last year. The net impact of these changes were really negligible. ZAR 3.4 million credit to the income statement, but definitely showing our conservative credit posture with a slightly higher impairment provision, but the net bad debt percentage expected to normalize over the F '25 financial year, back to historic levels that we've seen in the book. Importantly, there have been no changes to credit policies or the credit strategy of the group. The other point to note on this slide is just an external data point that we look at to look at the shape of our book and you will note that the principal face of credit report shows that the Mr Price Group book total good, total bad ratio at 8.3, better than the clothing retail industry at 4.1, and our percentage for plus cycle balances coming in at 4% better than the clothing retail industry at 11%. So all in all, if I had to summarize, we had a very strong second half performance driven by sales momentum growth, market share gains, improved GP and operating margins. Cash conversion ratio above expectation at 86.9% resulted in a significant closing cash balance of ZAR 2.8 billion and positive HEPS growth with 17.8% coming out in the second half. Also, our continued focus on cost management resulted in the expense to sales ratio decreasing below 28%. And all in all, a record operating profit level achieved for the group for this financial year. I now hand you over to Mark, who'll talk you through strategy and outlook. Thanks.

Great. Thanks, Praneel. Let's move on then. And if you look at the strategy framework page, I think all of you are pretty familiar with the strategic pillars that we've got. And those -- you can see them down at the foot of the page there. But what we've done, we won't speak to those pillars as they are -- we'd rather just wanted to unpack some of the strategic outcomes that we're after and we're aiming for. And as I said a little bit earlier, this will be further unpacked and more detailed discussion at our Capital Markets Day. So under the strategic outcomes and of course, the absolute focus is on the front line, that's our operations, and that's where we make our money. And we know that's all underpinned by all the enablers that we've got in the business, but profitable market share is what we're about, and it's what we're after. So we don't -- we're not often and we said this repeatedly over a long time. We're not after market share at all cost, and it's got to be profitable. We've got space growth. Praneel did speak to some of our -- the last 12 months in terms of the space growth. But when specifically, we can divide it between our current operations and our acquired operations, we acquired high-growth businesses, and we've got legs in terms of space growth in both our existing NI acquisitions. So that's a real positive. And of course, under profitable market share, we've done a lot of work over the recent years about category extensions, and we'll go into a bit more detail about that. So profitable market share, and you can only get that if you absolutely obsessed with the customer, I'm going to share a bit about brand equity and things that we've got to be careful. We don't take for granted it will become [ Blaze about ]. We've got to fight for the accolades that we are given and we do receive and I'll share some of that information with you. There's certainly a lot more work and efforts going to go into customer engagement and data insights. And our diversified offering is absolutely key to everything that we do. So by diversified offering, I'm talking about omni-channel, it's online and stores, but really most importantly, around the product offering, and that's -- I'll dive into some of that detail as well. And I said a little bit earlier, value positioning is really what the Mr Price Group is all about. And I think we're really well placed in that front. And very importantly, with value positioning. It doesn't mean that we -- that all the focus goes on trade and everything to keep as a lean organization. Of course, Praneel just spoke about what our cost to sales ratio is, but it's quite remarkable what we've been able to achieve as a business despite the absolute focus on costs, and I'll share some of that. Scale of opportunities. I'll talk a bit about the strategy function coming up. It's a bit about the new growth vehicles. But if you had to look over the last, I'd say, probably as long as 24 months, maybe even slightly longer than that. But certainly in the last 12 months as well. And I think that's an area where investors and the market can take a lot of comfort from. I can't count the number of opportunities that we've actually said no to. So we believe that we're after the good ones. We think that we've landed the good ones. And anything that does enter the Mr Price Group stable has got to be scalable and therefore warranting our attention. So [indiscernible] around operational excellence and the retalking supply chain and tech and there's an enhanced process now to kick off that in terms of integration as Praneel was alluding to. And wrapped up in that whole framework will hold and we're not prepared to let go of our leading market metrics. We did say a couple of years ago that quite happy to take some dilution, but we still want to be top quartile and it must come with growth. So if we are diluting our metrics, it's part of the reason that we want high-growth assets in the business. You can't let go of metrics and not get the growth. So I think if you just looked at the strategy, let's just call it the journey over the last couple of years. Whilst we've been upgrading our infrastructure, you all know about the ERP change, all the backup power in our stores. But from a growth perspective, our strategy has really been focused on despite category extensions in our existing operations. It's also been focused on acquisitions and new startups internally. So as I said though, I think all those have got a really good promise in front of them. But what you're going to be seeing now is in terms of our strategy and absolute focus on the customer, internal efficiency, operations and we're quite excited about what we're going to be doing there. And although we've got really good accolades and we'll go through them just now, it's really about cementing and our dominant position there. So a lot of discipline, as you can probably take up from the presentation. And despite all the movements in all the new businesses, all the activity discipline still in the forefront of how we think. Just going on to profitable market share and the growth momentum that we've got in the business again. What we've done is here, we've just checked this. So this is RLC growth. So unfortunately, not all our divisions are included in the RLC. There isn't a RLC for sporting goods, for example, so Studio 88 and Mr Price Sports aren't included. But there, you can see the trajectory of our apparel segment. And then in the lower graph, the trajectory of our homeware segment and how they've performed in terms of their sales growth versus the market. So on the apparel side, being above the market for some time. As I said, that has now extended into April as well. And I think if you start on that lower graph, you just start on the far left and you look at the gap there between ourselves and the market and look at where we are now, we can see that line converging. I did speak at length in previous presentations about the post-COVID era in homewares, the work from home, become a more attractive place for competitors to focus on. And there's been a lot of store openings of the independents as well. So it doesn't mean that we stood still for a minute, and we've still got some quite exciting internal plans. And hopefully, come November, we can talk about how those have borne fruit. But -- but all in all, a really good trajectory in terms of market share. And we haven't put the stats in here. But if you then take that on to the other segment, telecoms, equally impressive story. Market share is up 180 basis points in the last 3 years in that sector as well. This then shows the movements in market share over each of the quarters. We spoke about the drop in market share in Q1 at the beginning of the year, but a really nice kick back and regaining and going beyond in terms of the next 3 quarters. And whilst I spoke about discipline a little bit earlier, the other key thing is absolutely no distraction in our business. So one of the key things that we did put in place was the 2 positions of group retail directors responsible for the trading division performance whilst we look at other things and make sure that we still regard it as a growth business, and we do know that investment time comes before landing things, but we've got to make sure that we protect the core operations. There's no great asset in the business than our existing core. But obviously, we're planning for the long term as well. So really good focus in the business, and that was brought about by the organizational design changes we made to it during the year. Okay. Just still on the subject of market share gains. This then talks to the Stats SA number, which incorporates all our trading divisions and compares it against type D retailers per Stats SA. And there you can see the trajectory over the last couple of years as well. So moving from just sort of 14% market share in 2021 to 16.6% in 2024, F '24. I spoke a little bit about the organic growth progress. So of course, we've done lots of work with category extensions within our operations over the years. And we did go into some detail about the kids opportunity and both the cellular opportunity as well. Don't forget, Mr Price Kids restarted its life as Mr. Price Baby. We had some test stores. We took our learnings out of those test stores, and as a result, then changed the format and the merchandise offer to really land on what we've got 9 Mr Price Kids. And having some trade under the belt, being at 31 stand-alone stores now, there's nothing suggesting that we're not as confident about this model as we were when we actually told the market about it a short while ago. So within the kids space, very nice market share gains as well. And likewise, with cellular, Praneel was telling the extent that we own over 800 stores and really nice market share gains in the last 12 months according to GfK. When I was talking a little bit earlier about accolades, and it really talks to our brand power. And I'm not going to read out all these, but I think the important thing here is that these accolades are not one-off recognition. And very importantly, they're not Mr. Price, we patting on back these independent -- it's either independent research or independent findings. And we are very, very focused on making sure that we actually attain this and retain this position. All this doesn't happen on its own. It really gets to the DNA of our business. It gets to our secret source, our internal ways of working. The various formulas we've got -- and it all comes together and hopefully gets ingrained with our customers. We're in the heart and mind of our customers. And therefore, the whole offer and experience resonates with our customers. So some really strong independent confirmation of what we do that we're on the right track, but that doesn't mean that we're resting on our laurels. And our -- as a business, I still actually think we've got a lot to do to further strengthen our positioning. Praneel, in terms of -- he's talking about space growth a bit earlier, One of the key things that we weren't able to do or we chose not to do it was a trade off last year. We had to spend money on our backup power solutions in our stores and spent over ZAR 200 million there. And we made the trade-off last year that given that and the CapEx level that we had that we would not pursue store revamps as aggressive as we would have liked to, but that will certainly be a focus in the year ahead. Internally, there are some further design changes internally that's going to make sure that in terms of our customer care, what to do with our customer information, data and communication, all reaches a significant step upwards. And in fact, that all comes together that we focus on an enhanced customer experience at all the touch points that we have with those customers. On the next page, we're just really talking about brand power again, and this is the Mr Price concept of value. So just for everyone's sake, what this graph shows, is price quality fashion. It's been the traditional sense of what we used to call value in the old days, but added experience convenience. We have spoken about this before. But this is where I say there's going to be a lot more focus on this and activities behind each of these to make sure that we either retain or strengthen our positions. There's been a lot of talk around global e-commerce, what it means, where are we relative to that? And for me, I think we're very active in the digital platforms. Rather than just e-commerce sales, I think it's a connection that our customers have with the business via the digital platforms that we've got, and that's the way that they engage with us. That then informs their behavior and can see there in terms of the stats that we've provided, 67% of Mr Price Apparel customers, new social media to help decide where to shop and having had access to the various platforms have come in store. I think it's a connection that our customers have with the business that via the digital platforms that we've got, and that's the way that they engage with us. That then informs their behavior. And as you can see there in terms of the stats that we've provided, 67% of Mr Price Apparel customers use social media to help decide where to shop and having had access to the various platforms have come in store. So whether it's Facebook, Instagram, you can read the things there, some very nice increases. Facebook, for example, we have 6.9 million followers, up 60%, and you can read the rest. Our website traffic has increased by ZAR 14.3 million. So that's just all interactions with our website. That's up 12% and 86% of that website traffic does come from mobile devices. I think the heading there really says it all for us. So when you talk about e-commerce, it's not what we want. That's what our customers want. And we've -- in fact, we launched e-commerce. In fact, we're one of the pioneers in this space in 2012. So we've been going for about 12 years. And I think having done a reasonable job at e-comm, we're slowly at 2% contribution. So it really talks to research online, our customers that are telling us that they like to do that and then come shop in store. And it also depends on your market positioning because I think it's a very different value proposition, and therefore, as a value retailer of how much we invest in this platform, e-commerce, because we have got an absolute desire to turn a profit, and we've been doing that for many, many years. But very importantly, if you're a value player, we all know what in South Africa, what that means, the type of customer you attract. And then I think it's a very different story to a higher income customer. And if you take online in SA generally, it's about 6% of retail. You've got to strip out food out of that, so let's call it 4% for apparel. We're sitting at 2% because we're in the value space. But if you take one of our businesses, Mr. Price Home, for example, high-income consumer so it's not mid- to lower end, that the online contribution is over 4%. So I think that really talks to the fact that there's a propensity for a higher spend from the higher income consumers. You can see the stats on the right-hand side there. The consumers are continuing to favor the omnichannel shopping experience and a big thing in that is convenience where not only can they pick up their product at stores, but there's over 900 Pargo collection points. So convenience is definitely there for them. And if you just take that convenience and bring it back to the 2%, that's the customer telling you that they want to shop in our stores. That said, we have identified areas that we can improve our e-commerce offering. We chose not to last year. We are very focused from a technology point of view of closing out the ERP. I think that is enough for a tech team to deal with. But we have identified improvements to our platform and our processes that we're going to -- in fact, we're cracking on that already, and we've allocated some capital expenditure to that as we speak. A lot of it is actually aimed at just greater functionality, greater information from our customers. And once again, our design comes into play that. And I think that's something that this business has been very focused on the last couple of years. Absolute focus creates absolute clarity in the business and delivery. And then just to finish off, you have heard about this already, just in the marketplace and the threat of global e-comm, and we did see that the Minister Patel recently advised that import duty, we were delivered in full at 45% and that on top of that. So in a lot of cases, you're going to be seeing these global retail prices going up as close to 40%. That will be a more level playing field for us as well. Let's just talk a minute about our diversified offering. I think this is really our key differentiator in the business. And I'm talking about the apparel sector here for a start. As we know, private label offering and all the way -- all the methods that we use to inform what that is, that looking at trends, how to interpret trends for the local customer and all the marketing, everything that goes around it, we are a heavily, heavily dominant private label business. Of course, there's -- this business is enough holds. For example, Studio 88, that is more brand-focused, but I'm talking about the category, the segment in totality here. So it's not -- although there's been a lot of, I guess you would say a lot more focus or attention on the value side of the market. What we offer in terms of our private label offering is very difficult to emulate. And that's a big -- it's a primary reason for our success. But it doesn't stop there. So we do recognize that consumers don't always just want to private labels. So we do have brand partnerships, and you can see some of them there. And in addition to some exclusive relationships that we do from time to time with some international brands, and you can see them on the far right-hand side. So good mix, but an overwhelming majority on the private label side of the business. And then if you pop across to the home sector, pretty much the same. Heavy focus on private label. And quite interestingly, it's not just Mr. Price Home and Sheet Street we're talking there. It actually extends into Yuppiechef and who have won awards with some of their private labels. Brand partnerships in this case either relate to more trending items or new products in the market that are making a big impact. And then thirdly, collaborations. And most of our collaborations is this is real differentiation once again because you are collaborating with artists and handprint that -- the handwriting that they put on their products. And the really great thing with collaborations is that it's SA-focused in terms of procurement. Carrying on with the diversity of our offering. And once we do all that we just explained, well, where does that actually put us in the market. And there's been a lot of questions recently of where is your pricing, global online, how does that affect your business? And here it is. This is what we call the fashion value matrix. This is performed by borderless access as once again, it's not our -- it's not our information. And they go out and do research and any sample that they take is representative of South Africa at large. It's a representative sample, and very proud of the fact that we're keeping our position on the fashion value matrix there. And everything that we do is actually focus on actually making sure that we retain that position. Very pleasing. Our own internal surveys. We've been on a journey for many years now on quality. Quality is one of the things -- one of the aspects of value and 92% of our customers saying that we've either offering the same value for money or better than last year, which is pleasing. Moving on to scalable opportunities. I spoke about the discipline that we've got in our business a little bit earlier, but you might not know a lot of this background. Our Apex strategy team was established many years ago, in fact, in 2019. We started researching the market in 2020 to look at growth opportunities and then launched our new internal growth strategy in 2021. And part of all that work was identifying businesses in SA that we thought were great businesses and we'd like. And on the right of that, I think it's the fourth bullet down, you can see the scale that it's actually brought to our business. So in the last financial year, the acquisitions have delivered ZAR 10.7 billion to sales and the operating profit of ZAR 977 million is up 35%. Just in terms of the definition of operating profit, it's the income statement definition. So interest on lease liabilities is below this and obviously outside shareholders' interest is below that, too. But it just talks to the scale that it brings. And I look back on the process of 3 -- landing 3 acquisitions. And I guess for a business that hadn't done acquisitions for a number of years, there are questions on do we have the skills to make them land. Are they going to be distracting to the business, but I can send you and tell you that if I had acquired these businesses, again, I would, and the acquisitions are working for us, and they've still got really good growth prospects ahead of them. So really, really proud when you really consider the fact that, I guess, some -- since the date of the acquisition, it's been a really tough retail environment. And when you're looking at accretion, interest rates have moved, but despite that, we're still in an accretion position. So overall, very happy. The strategy team has also been quite active in terms of that whole baby kids move. Equally, the cellular and those were the 3 internal concepts. We have had spent quite some time on additional internal concepts. We've evaluated them. We know what the potential is. We're not choosing to trigger those at this point in time, but we'll keep them in the cupboard for an appropriate time and reconsider down the line. So all in all, I think, a very healthy mix by internal and external focus. The team has also been repositioned. It's been -- the Australia team has been extracted from our business. It's not in the head office complex. It's not independent. They can go about the work, acting independently and not get sucked into operational matters. And I guess for any organization, strategy is your greatest risk if you get that wrong. So we've got absolute clarity. But if you get strategy right, it's also going to be one of your biggest assets. So all in all, very happy what's happening with the Apex team. And the work will continue, quite excited about the future with that team. Operational excellence, I talked to the concept of discipline once again. Our centers of excellence, in fact, there's many accolades and activities that we're quite proud of this year. First of all, I think the execution of our people strategy has been quite key. We feel it internally, and that's resulted in a top employer certification, which is really positive for us. And in fact, we're one of 2,200 companies globally now to carry that certification. Our stakeholder engagement scores is something I'm very proud of. So stakeholder engagement, it's with our people, it's with landlords, that's with suppliers and it's with the investment community. And what we do in that, we obviously evaluate our own performance, get ideas for improvement. Look at how we performed relative to last year, but importantly, also then ask those bodies that came to rate us versus our competitors, and we're on the right hand -- we're on the right side of all those outcomes. So a lot of what we're doing in turn is really focused in the right direction and we've been recognized for it which is really positive. Our centralized real estate team delivered over 300 projects. And in terms of the CapEx cost of new builds, that's gone up by less than inflation, so have done a really good job there. And very importantly, and often summing it for a value retailer is overlooked. And certainly, when we interact with investors, often very surprised what we've been able to do as a business on the sustainability front given the fact that we are a value business. But once again, it's been recognized -- our efforts have been recognized externally by Sustainalytics and the MSCI ratings. And in terms of the ISS rating, our transparency has been rated very high, which I think talks to us as a business as well. Supply chain will continue getting focus. And I think this team has done an exceptional job with the disruption that's happened to supply chains in general. And at the same time being absolutely focused on our cost per unit and what it takes to handle and move our product amongst all this disruption. So when we go into the future, we'll still keep that mindset. But there's going to be a process now, and this team is quite hard at work, speaking to new divisions, coming up with ideas in terms of efficiency and saving on -- mainly on the supply chain because it's obviously a supply chain team that I'm talking here, that will just further cement integration efforts, but, b, the whole value mindset that we will bring to the entire group. Then on the tech front, we will continue that tech modernization. We're really pleased about getting that ERP implementation behind us, so we can now focus on moving on. And I'll speak to the page -- the next page in terms of innovation and some of the exciting stuff that we're going to really ramp up our investments and our focus, which is going to be quite exciting. And the exciting part of, obviously, the tech team is Mr. Price Advance. This team has also been in place for quite a number of years and made really good inroads in terms of business intelligence, machine learning and AI and RPA. We haven't spoken to the market a lot about this, but certainly, if you I won't go through all the details there, we've had a lot of really positive momentum. But this is something that I'm really looking to get more of as we move ahead. The IT team can really now focus on landing in fact, some additional items within this framework. And it's a lot around the customer and data, it's informing decisions. And although as I said, we've made quite nice progress, I think, there's a way to go here. So really excited about this part of the business, too. Praneel was talking a little bit about progress on acquisitions earlier. I'll just spend a minute or 2 just talking through the 3 businesses. First of all, all businesses are on the Mr Price group, they all adhere to our policies, okay? So whether it's a supplier or a code of conduct or anything like that, it will subscribe to that. In Power Fashion, we implemented the HighJump warehouse management system during the year. That now aligns them to our supply chain blueprint, enables future growth and enables a lower cost to serve. Yuppiechef, we've appointed a Mr. Price MD in the business that year. And I think the real opportunity in that business, although we've had some missteps along the way. With the person that's now heading up that business, an experience MD comes from a very strong planning background, and that's exactly what that business needs right now. I think they've got a really good team there. But as you extend the merchandise assortment and you go more towards the store in an omnichannel environment, there's a lot more complications in terms of planning. So that's going to be our focus in the short term. But we're already seeing some nice green shoots from that business. And then Studio 88, also adhere at our policies, the financial integrations commenced, obviously. And we've been -- there's been quite a few discussions and interactions with our team really around supply chain and efficiencies, and we bring tremendous scale to transport and logistics, and we think they can benefit from that. And we were talking a little bit earlier as well about resourcing new divisions, co-sourcing with the other Mr. Price divisions and sharing supply bases, we've done some really good work there. marketing, tech, e-comm will also then follow in due course. But you can see that I think the initial period of acquisitions of landing them, exposing them to our culture, learning how to work with them. But very importantly, letting the guys just really concentrate on trade and delivering that side of it's worked. We never built the business cases on efficiency, but we're now going through an efficiency phase and that no doubt will bring fruit too. Looking to elaborate here on capital allocation, Praneel's spoken to it at some length. Cash generation, absolutely critical for us. That gives us the license to invest and do other things and pay dividends and capital allocation goes out saying its allied to our strategy. And in that we allocate capital to the highest performing opportunities. And in the last year or 2, we've been very rigid on that, which has worked for us. And then just as an overall thing, we do continue to assess share buybacks in our dividend policy. But you can see over the last 3 years, I think we spent the money wisely and those investments are paying for us now, and they're going to continue, in my view, in the future. So building a bit on the targets that Praneel spoke to. So there's been a -- with the changing shape of your business, you're bringing in new businesses at lower margins, as Praneel said, what does this mean for Mr. Price Group? And how should we think about the shape of your income statement and the shape of your balance sheet and your metrics? I won't go through them all once again, but that's the ranges that we're settling in. But it does come with a proviso that I said a little bit earlier in the presentation. I don't want softer metrics without getting the growth. And certainly, those medium-term targets are, in fact, that medium term. It doesn't mean that once we approach that medium-term target of 3 years that we're not going to reset the next level of new targets, fresh targets. So hopefully, that gives the market a lot of see-through, a lot of visibility in terms of our expectations of our business. And if anything changes within our thought process with what these targets have been set out in the short term, we'll be sure to communicate those with you. [indiscernible] Okay. Looking at the outlook then. And I think you've probably seen this in some of the updates from the other retailers. I start by looking at April and May and trade was subdued in those 2 months. First of all, you had the contraction of the SA economy in that first quarter, January to March, that's obviously spilled over into Q2 a bit. We had a school holiday shift, April into March. So of course, it leaves a bit of a hole in April. And we had a late onset of winter. And I think all the local guys can attest to that. May temperatures and we've done the analysis were way ahead in minimum temperatures and MAXs were significantly higher than the 6-year averages. So I think that's all contributed to that. And who knows, who knows how consumers were feeling about the tension around elections and whether that play part, there was a public holiday for voting day that affected May. So those months are behind us, but the important thing for us for April is that we did continue with that scenario I just painted. We did continue to gain market share. However, June performance has really surprised us. But maybe it hasn't been so much of a surprise because I think there's a lot of pent-up demand. Winter arrived with a bang in June. And we performed exceptionally well to date. So only sort of halfway through the month. But if you then take the whole period April through to middle of June, we're reflecting sales growth of 4.4%. Importantly, that's on a base of 17.7% growth. So the base is high. But also importantly, it also hasn't come at the expense of margin. We've gained market share. We've gained gross profit. So an improving trajectory in our sales allowed to improve market share and the quality of the sales has been good. They've been at an improved margin. So very happy with how June is working out. When I say strong -- I mean strong and I think really looking at the next 2 weeks, we're probably expecting really good trade for those 2 weeks as well just looking at how pay days fall. We've got a July movement of school holidays into June this year. So I think we're going to close out that second part of June nice and strongly, too. And incidentally, if we haven't put the numbers here, but June on its own is well into double digits, in fact, it's north of 20% growth. So we're left to then see how things translate with political outcomes and see what happens to consumer confidence. But I think when I was talking about a little bit of green shoots earlier on, I think we're starting to expect those in H2 more than H1. Spoken about the price increases from the global e-comm players. But importantly, inflation is moderating. Hopefully, we see interest rate decreases in H2. Consumers have now got the ability come September to access some of their retirement savings. Part of that will find its way into retail. And as I said, we've had a strengthening of our currency in the last few days or the last day in particular. But if the political outcome lands in a favored scenario, then I think we're going to see further improvements in the rand. So that doesn't just benefit us from our input costs, although we are hedged for a lot of this year, but it lowers the imported cost of a lot of other things, the benefits for the consumer at the end of the day. As always, we've got a massive focus on inventory management. We plan to exit winter as clean as possible. So that heightened trade that we're seeing in June so far is alleviating the pressure that we did feel in April and May. So we just need a bit more of that positive trade, and that will put us in that position to clean -- to exit the season cleanly. But with all -- the thing that I also have to caution against is the impact of the port disruptions. Those are ongoing. I think PORTNET has been proactive and actually making sure that they are accessing new equipment. They have acquired some, but unfortunately, these things aren't installed overnight. And I think the consensus view is that it's probably going to take the best part of 12 months for that equipment to be operational in a way that's going to positively impact the clearing of containers and the like. So with that environment, unfortunately, what we have had to do. And bearing in mind, our level of imports is roughly the same as our competitors, around about half. We have had to build in lead times for that imported component in an effort to make sure that we don't actually lose too much on the top line by dealing with the port disruptions. Looking at capital expenditure for the next year. We'll update this as we go, probably about ZAR 1 billion and about 200 stores. Absolutely key is we've got metrics in terms of our performance that we want from these stores that don't achieve their metrics, be slowing them down. And we're certainly after quality and not quantity. So if I reach that 200 stores, it's great because we'll be getting the returns that we want from it but there's absolutely not a race to get to 200 stores. If it's not coming with the right metrics, we're going to walk away. So as I said a little bit earlier, a lot to focus on internally. We've got great businesses. We've got a lot to focus on. We've got a great team that we know can execute that proven themselves, and we're really well positioned for any potential upturn in the consumer environment that does take place. Thank you.

Good morning, everybody. We've some time for some Q&A. There have been a large number of questions coming in. So what I will do is just ask a key question per team. [Operator Instructions]. And then a number of questions around the homeware performance and improved performance. Can you comment on whether that's improved demand in the segments, reduction in competition or what levers have you pulled from the own business to improve that? I'm sorry, and just to talk about sustainability of the operating margin guidance as a result of those levers being pulled.

Yes. Well, first of all, the guidance that we gave for operating margin in the homeware sector was guidance relative to how we're currently performing. So what we do is we take current performance into account, project it forward into the budget for the next year and then obviously, in the strategic period that we plan in terms of long-term performance, and we satisfy that we can get back into that range. I think if you look at the -- of the performance of the sector and what I said a little bit earlier about new entrants coming in, but disruptive a lot of store openings, that certainly started to slow down significantly. And the graph that I spoke to, we actually saw the gap that happened that was -- that took place, I suppose, 18 months ago relative to our sales growth versus homeware, that gap has narrowed significantly. So I think we're not too far away from us now being in track with market growth, but that doesn't mean that we're not doing anything internally. So whether you take -- in fact, take all 3 divisions, there is a lot of activity to make sure that we continue reinforcing the things that we're really good at. I spoke a lot about the differentiators and the private label and the like. But one of the business, for example, Sheet Street has been particularly hard hit by these new entrants and just by consumer pressures. So we've reacted to that. We've done things and turn it to our merchandise assortment. 30 days because it's only reached a new product that's come in, in the last couple of months, can't say too much about it at this stage in it because it was in a test group of stores as well. But the early indications are that it's proving really positive and not just positive from a sales perspective, but positive from a margin perspective. So if that kind of trajectory carries on then I think that business will certainly be back on its track. And then I spoke a little bit about Yuppiechef and the change in leadership and what's required there. And I think the short term. And look, Yuppiechef in terms of turnover is the smallest division in the group. But the focus there is to read on systems and process before we're expecting big changes to the bottom line. But like the other business, it's also on time line, and there's no reason to believe that the efforts won't be successful either.

Okay. Thanks. On to a question for Praneel, just around credit sales. Credit sales are 1.7%. We're on the lower side. Some competitors have reported a much higher credit growth, just to outlook on the credit environments and the group's posture going forward on it.

Yes. Thanks for that. So from a credit sales growth perspective at 1.7%, I think we've lined that up with our credit posture, conservative credit posture as we always do. Credit isn't a big lever for us. It's less than about 11% of the group total sales. I think in the macroeconomic environment that we're currently in, it becomes very difficult to try and position an aggressive credit strategy. We've seen consumers under pressure, both from food and fuel inflation together with higher interest costs impacting debt serviceability for customers. So I think that's been really challenged and strained from a consumer environment perspective. Our view in terms of sales, we want quality sales and not sales that we've booked right off later. And I think we're quite agile from a credit strategy perspective. So our Mr Price Money business, quite agile to be able to take advantage of any changes in the macroeconomics. So if there are any opportunities in the second half, if we see interest rates moderating maybe, consumer disposable income increasing maybe, we are agile enough to be able to take advantage of those in terms of how we grow the book. But we will always do so very responsibly in terms of lending credit and we know that the demand has been significantly high, but our approval rates will moderate and our scorecards will moderate the quality of sale that we book.

Just to stick with you Praneel on cost control, a number of different questions around expenses. But in H2, with performance improving and variable incentives coming back in, performance continues to improve into FY '25 just the impact of that has relative to different levers that you can pull from a cost savings perspective around incentives coming back in.

Yes. I think lots of interest and focus on cost management in the market and particularly always the case in our business, as I said, it's part of our DNA. You would have seen in Mark's presentation around strategic outcomes that there's probably 3 slides where he spoke about operational excellence and execution, which results in like significant cost savings. For example, we spoke around the supply chain blueprints and the integration for acquisitions. We spoke around tech modernization and business process changes. We spoke to you a little bit about the advanced team and the work that they've been doing since 2021 in terms of introducing RPA into the business, saving hours together with AI and ML helping processes being leaner and more efficient. I think those kind of projects will continue in the business. I think there's obviously a -- from an oversight perspective, we've set the target at less than 28% expense to RSOI as a metric, and that's a metric I'm very involved in and very interested in terms of delivery to the market. So I think that we've got a variable pay performance strategy that we spoke about, but I think we are able to have oversight across the business and get the efficiencies that we need. Mark also spoke to you about the acquisition integration plans across the different businesses and the stages of development that they are in, together with procurement synergies and that kind of thing in the supply chain. So I'm quite comfortable. And also don't forget, I did show you my favorite slide earlier that shows that we have the lowest operating cost in the sector, and we will continue to focus and deliver that.

Just to add to that, if I could. I think history has certainly shown that Mr Price Group, having the ability to react to trade in terms of their cost control and trade does come off -- they've got this incredible mindset of hustling and making sure we get profit wedged to that. So that's the difference in growth rate of expenses to GP growth. We're always going to continue that, and that's part of our DNA as Praneel said. However, I think there is a reengineering side of it that we don't presently have the skill set that would be ideal. And certainly something that we're looking at, but I think the next wave of any efficiency is going to be really delivered by process reengineering, especially with new divisions. And the more a mindset that goes across the businesses rather than maintaining the channels of separate trading divisions.

Okay. A question moving may be on to Studio 88. The athleisure space is about to get even more competitive with the entrance of JD Sports. How are you thinking about the increased competition in that space and the differentiators within Studio 88 to deal with it?

Yes. First of all, I think Studio 88's positioning is really key. And you look at the kind of customers that they attract. But once again, its brand positioning and they're either 1 or 2 in SA with Nike, adidas and with Puma. And -- but we haven't really spoken a lot about the private label assortment there either. So I think with JD Sport coming in, it's very likely that they're going to be going into very premium locations. And in fact, when you look at the Studio 88 group as a whole and where their locations are and where the growth is coming from, it's not centered around those premium locations.

Okay. Just sticking with competitive threats, just to talk through impact, a number of different questions on Shein and Temu and other pure-play online retailers and their impact on the business, where there has been an impact and just a strategy to deal with that.

I think I've covered that in the presentation by talking about what our customer wants. They want -- they've told us over 12 years that they want to research online, occasionally shop online and come into the store to buy. I think it's undeniable. You can't sit and say that those foreign e-comm players haven't had an impact on the market. But even from a value customer acquiring product, where all the challenges related to e-comm for a value customer in SA, I guess the customer has been willing to overlook some of those or to work around it because of the very aggressive pricing that they've been getting from those e-comm players, which, as I said, is about to change. So we'll have to see how that lands. We're also very hopeful that its action by [ SARs ] in the way that they've said and that they do hold those players to account, and we'll have to wait and see.

Okay. A number of questions just around the impact of the ports. I put it to both of you. Considering Durbin is a key entry points to South Africa for the group's supply chain, how is congestion and higher container freight rates or will continue to impact the group's short term margin outlook?

I did speak a bit about the port and the equipment that's being procured. I think there is new leadership appointed there. By all accounts, the CEO seems a very capable individual with deep experience in the industry, and has got a very much a back to basics and performance mindset. So I think that really sets us up very well. But like anything, it's a big organization, and these changes aren't going to come overnight. So although I spoke about increased lead times and it's not ideal, but it's probably the best thing to do now. It's not something we have to go and build in and project into our model now for the next 3 to 4 years. It's going to be over a short-term impact. And we'll have to just wait and see that this equipment does come in, that it does work and that it's got its desired outcomes. That's from the port side. Of course, when there's port congestion, the shipping carriers are impacted equally. So you've got a number of things that they do and a number of things that we can do to make sure that we derisk. And I'm not going to go into all those details, that's for our own consumption. But of course, the potential knock-on with global issues and with port because you've got origin and you've got a destination is -- there's a lot of concern around shipping costs increasing. Significant part of that is because of port disruption. So either you're going to come into out to anchorage and sit, but in what's happening in a lot of cases, you can't tell how efficient the port is now by the number of vessels. And if it's a low number of vessels at the ports efficient, because guys are slow steaming from other destinations. It just means that they take a slower route, burn less fuel on the sea. But in the short term, the next 12 months or so, shipping rates are a concern.

You spoke about positive engagement with landlords, Praneel I direct this one to you. Could you please provide more color on the interaction between landlords and retailers. There has been a word that the landlord's negotiating power has improved. So how do we think about store costs going forward and to talk about payback periods on stores as well. And just in general, the 200 new stores, CapEx being allocated towards next year, just talk about the returns and the margins of those stores.

Great. So yes, as we mentioned earlier, stakeholder engagement is really important to us. It's one of our pillars in our strategy. So we do spend significant amounts of time engaging with this -- with all of the landlords across the country. We did score very highly in our engagement score with landlords, much higher than competitors. And I think it really talks to the partnership approach that we take in terms of our business model. From that perspective, obviously, we've seen that rental negotiations have been challenging, obviously, with the cost -- rising cost of doing business just generally in the country. I think we've been able to manage these negotiations on renewals in between the 5% to 6%. So we've been quite strong in terms of those negotiations. But obviously, those are developing all the time. But yes, the relationships are really important to us, and we'll continue to foster those engagements with landlords all the time. As I mentioned earlier, our brands are most loved in the country. So our ability to draw feet into malls and stores is what landlords really love. So I think that's where we have a bit of an advantage. And I think we'll continue to work on those engagements and relationships with landlords. In terms of the capital allocation, we spoke around probably ZAR 1 billion being invested in CapEx this year. A large proportion of that will go into the store environment. Those metrics are very closely monitored. So store feasibilities are under scrutiny all the time, assumptions that drive the store feasibilities are under scrutiny all the time. And we track and manage those very closely. So in terms of the returns that we get, we are quite comfortable that they are exceeding the threshold that we've set internally. And if stores are not making those thresholds, then as Mark said earlier, we'll divert capital expenditure into other brands that are high growth or other capital allocation opportunities. So yes, so we're comfortable with the returns we're getting. And I think that just shows -- I mean, ZAR 1 billion investment into the economy in the next year is quite a big number also.

Look, the pressure is on the premium space. So it's those high incentives where I think there's most demand for space and where the most rental pressures are coming. Our footprint goes way beyond that as we know. But I'll give you an example of Mr Price Kids that we -- the test to date has shown that Mr Price Kids, once you take it out of the mothership, it performs better when it is still within spitting distance of the mothership. So we do want it to be as close as possible, and it also comes to those premium sites, as we've discussed. And it's not always the easiest space to get. But the beauty there is -- with that some model that we know works. And often when there's turnover rentals included, and this is why the engagement with landlords is key. The more we bring it closer to the mothership, the Mr Price Apparel store, the better it performs, and then we both win. We get better trading performance, the landlord gets higher turnover rental.

Great. Thanks very much. We have come to the end of our time. As I said, if you do have further questions, please do send them through to me, we'll come back in the next day or 2. The webcast that you just watched now will be available on the website along with the presentation slides. Thanks very much for joining today.

Thanks, everybody. Cheers.