At first glance, the trading performance of Mr Price’s home segment in the last quarter of 2022 looked bad, but not disastrous. In the three months – the peak trading period for retailers – sales at Mr Price Home, Sheet Street and Yuppiechef declined by 3.5%.
Dig a bit deeper, though, and things start looking pretty dreadful. Factor in price inflation of 6.2% (excluding the acquisition of Studio 88) and suddenly the unit decline is practically 10%. Also, 2021 acquisition Yuppiechef saw “double-digit sales growth”, which means the drop in turnover in this segment is a little more pronounced (Yuppiechef remains small relative to the rest of the division).
The warning signs have been there for about a year.
In the last three months of the prior year (2021), sales in the Home segment were up just 0.7%. The group rather disingenuously refers to the headline 8.3% increase including Yuppiechef in this month’s update. An effort to highlight a high ‘base’ perhaps? In the first half of FY23, sales in this segment were down 1.6%. And now a larger decline is visible.
The Mr Price Home brand is responsible for two thirds of the Home unit’s sales, Sheet Street for just more than a quarter, and Yuppiechef about 7%. Together, these brands accounted for 22% of Mr Price’s overall business in the first six months of the financial year, but this will drop going forward with the inclusion of Studio 88.
The group describes the category as “highly competitive”, which it is.
TFG – the other large, listed player in the category – reported a 3.4% increase in like-for-like Homeware retail turnover for the October to December period. This excludes any new stores and the impact of the acquisition of Tapestry (Coricraft, Volpes, Dial-a-bed).
Spend on homeware is more discretionary than apparel, and with consumers under pressure it is not surprising that growth lags clothing. Still, TFG managed to eke out decent turnover growth in the category. But it cannot be the main cause of Mr Price Home’s (and Sheet Street’s) struggles.
The threat from Jet Home looms large (more on that later), however the brand’s footprint is still modest, at a few dozen stores.
Enter Pep Home
Mr Price is facing significant competitive pressure in the ‘value’ segment. Nearly a year ago, Moneyweb highlighted how the Durban-based retailer was squarely in the sights of Pep:
Read: Pepkor takes aim at Mr Price with new growth format
Pep Home is almost certainly competing directly with Sheet Street (which has been extending its offering into – you guessed it – décor and kitchen). But as Pep continues to add Home stores in markets where it simply hasn’t been trading, you can be sure it will take some share from Mr Price Home.
The standalone Pep Home format has been an incredible success.
By September, it had opened 355 of these stores, an increase of 61 in a year. On Monday, Pepkor said Pep Home sales were up 22.9% in the last quarter of 2022. This, with a store footprint heading towards 400.
One in every 14 Pep outlets in SA (it has 2 600 of them) is a Pep Home store.
These days, Pep Home stores can be found in major malls, such as Fourways Mall, Clearwater, Norwood Mall, N1 City, Cornubia and Ballito Junction. This means it is competing head on with Mr Price Home. It obviously also trades in centres serving lower-income families – think Cosmo City – where it is up against Sheet Street.
In its annual report, Pepkor says it has seen market share gains in the homeware category of 415 basis points in the past three years. This is substantial.
But it’s not only Pep Home that is clearly taking market share from Mr Price Home, which arguably defined the ‘fashion value’ offering in homeware.
Part of the attraction of Jet for TFG was the ability to re-enter the ‘value’ homeware space with that brand. At some point, Edcon attempted to roll out Jet Home stores with little success (mostly due to a confusing merchandise assortment, including 20-litre drums of paint at one stage).
TFG sees Jet Home as a key growth driver for the group in the medium term.
By September, it had opened 20 Jet Home stores. Within three years, it sees this number at 150. You do the maths …
TFG is not about to cede the value market to Pep. An intense battle for market share is just beginning.
Mr Price won’t be twiddling its thumbs. You can be sure there is a lot of management attention on the homeware category currently. A refreshed Mr Price Home proposition may help. But the core clothing business needs time and focus too.
A new entry …
Oh, and H&M has caught on to the fact that the margins and stockturn on homeware items are pretty decent.
It has snuck the department into many of its local stores, and in November opened its first standalone H&M Home store in Sandton City.
This will never be a 100-store network (it only has 27 shops in the country) and is not quite in the traditional ‘value’ segment (at least not in the SA instance), but every homeware item it sells is one that won’t be bought at Mr Price Home – which just adds to the pressure …