Ambitious South African fashion retailer Mr Price has clinched its fourth acquisition in four years, splashing out nearly R10bn in making a foray into the R5.5-trillion European market in a big strategic pivot for the group.
The group’s R9.6bn deal to buy German-based NKD, a cash-based apparel and homeware retailer, adds further firepower to Mr Price’s 2021 strategy to build Africa’s retail supermajor.
Other acquisitions in its spending spree include Studio88, Power Fashion and Yuppiechef.
Mr Price’s strategy since 2021 focuses on accelerated growth through strategic acquisitions to expand into aspirational or premium segments, organic growth via new concepts like Mr Price Kids and Cellular, enhanced customer value, technology, supply chain localisation, and strong ESG and sustainability efforts, all while maintaining its core value proposition for the mass market and fostering an ownership culture.
The acquisitions so far have more than doubled the group’s store footprint and added about R18bn in sales. The NKD deal is by far its largest venture, taking it from a regional to a global retailer.
The market reacted cautiously to the announcement, with the share price dropping 13.7% to R181.32, in its biggest one-day fall in more than six years.
According to MP9 Asset Management’s Aheesh Singh, investors will remain cautious until Mr Price proves that NKD can grow earnings and lift margins, especially given the high acquisition price relative to Mr Price’s own valuation.
He said that NKD’s low net-income margin could dilute group profitability unless meaningful structural improvements are achieved.
But Mr Price is not fazed. CEO Mark Blair told investors there was also initial market scepticism when he pursued other acquisitions.
“I look back now and say those are high-performing businesses, and I am very proud of what they have achieved,” he said.
Blair said the purchase forms part of “building a new, special story for a new Mr Price”, one that extends beyond South Africa while reinforcing the company’s position as a value leader.
He confirmed that of the group’s R39.4bn in retail sales, 92.1% still comes from South Africa, with the balance from the rest of Africa. Power Fashion, Yuppiechef and Studio 88 generated R11.7bn in combined retail sales by March, contributing 29% of total sales, while the Mr Price Kids and Mr Price Cellular concepts delivered R4.3bn.
The deal is worth the short-term disruption.
— CEO Mark Blair
The NKD deal will be funded through a mix of cash and debt, introducing long-term borrowings that will need to be serviced. Blair described this as a necessary step.
“The deal is worth the short-term disruption,” he said, adding that NKD gives the retailer additional scale and access to “white spaces” that can support future growth.
“We will not give up our competitive position by not investing.”
Blair also acknowledged that Mr Price’s previous international ventures, including earlier attempts in Nigeria, other African markets, the Middle East and Australia, largely failed.
These efforts took place before his tenure and often failed because the company entered markets it did not understand well and where customers did not respond to the brand.
He said those lessons have shaped the group’s far more disciplined and research-driven approach to international expansion now.
Woolworths also went international with a high-profile attempt to expand into Australia through the acquisitions of David Jones and Country Road, with the venture ending in disaster.
The 2014 acquisition of David Jones for R21.4bn, largely debt-funded, resulted in a nearly R20bn loss when the business was sold in 2023.
Poor integration, operational missteps and challenging market conditions in Australia weighed heavily on Woolworths’ overall performance.
Meanwhile, Pepkor and TFG have pursued aggressive acquisition strategies over the past five years, but their moves have largely been regional or targeted.
Pepkor strengthened its presence in adult apparel, homeware, furniture and financial services, while TFG expanded its portfolio with value and lifestyle brands locally and in the UK.
Truworths meanwhile, focused on organic growth, infrastructure investments, and selective local acquisitions rather than large-scale international ventures.
According to retail analyst Tasneem Samodien, Mr Price has stood out because of strong management, disciplined financial practices, and strategic agility.
The group has consistently invested in its local operations, expanded its store network and seized acquisition opportunities at attractive valuations, allowing it to deliver strong cash flow and long-term returns even as competitors navigated economic headwinds and challenging expansions abroad.
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