Retailer Mr Price has emerged as an outlier, defying the back-to-South Africa trend and sparking investor panic rather than admiration.
Just as confidence is beginning to return and large listed companies are refocusing on the domestic market, the group has chosen to move in the opposite direction, making one of the boldest bets in the retail sector in years — a decision that has unsettled investors.
More than 5% of the group’s value has been wiped out since the announcement, extending a 22% fall in the past six months. Nearly 40% has been lost in the past 12 months, declines that accelerated after the NKD deal was announced in December.
At the time, Mr Price said it would buy German retailer NKD for R9.6bn, giving it access to the huge European clothing and homeware market. It is the group’s biggest deal yet and takes it from being a regional player to a global one.
For investors, the concern is not just the size of the acquisition but the timing.
The announcement came while sentiment, capital flows and local investment opportunities were improving, but Mr Price chose to expand into a highly competitive European retail market — financed partly with debt — placing it at odds with a growing belief that the best returns may once again be found at home, not abroad.
Sentiment improved
Perspective Investment Management chief investment officer Daniel Malan said sentiment has improved noticeably over the past year. Construction activity is rising, private businesses are investing and global investors are showing renewed interest after South Africa was removed from the Financial Action Task Force greylist.
“With one notable exception [Mr Price], we are seeing businesses such as Tiger Brands, Spar and Remgro divesting from their far-flung offshore assets and strategically refocusing their organisational resources on their core South African assets and local growth opportunities.
“Interestingly, the recent negative share price reaction of Mr Price to their disclosed offshore acquisition is a strong market signal that directors of listed companies and their corporate advisers should pay close attention to,” he said.
With one notable exception [Mr Price], we are seeing businesses such as Tiger Brands, Spar and Remgro divesting from their far-flung offshore assets and strategically refocusing their organisational resources on their core South African assets and local growth opportunities.
— Daniel Malan, Perspective Investment Management chief investment officer
The NKD deal is not small change. At R9.6bn, it dwarfs Mr Price’s previous acquisitions, which include Studio88, Power and Yuppiechef. The deals helped more than double the group’s store footprint and added about R18bn in sales.
But Europe is a different game. NKD operates in a highly competitive, low-margin market. According to MP9 Asset Management’s Aheesh Singh, investors are worried that NKD’s thin profit margins could drag down the group unless Mr Price can make big improvements, he previously told Business Day.
There is also concern about the price paid. Mr Price is buying NKD at a valuation that looks expensive compared with its own, raising fears of earnings dilution.
The deal will also be funded through a mix of cash and debt, introducing long-term borrowing that will need to be serviced, something Mr Price has largely avoided in the past.
The investor caution has also been shaped by unfavourable market memories. Woolworths’ disastrous expansion into Australia, including its R21.4bn purchase of David Jones in 2014, ended in huge losses and a forced exit nearly a decade later.
Even Shoprite, deemed the country’s most successful retailer, divested from several international markets due to financial losses, currency volatility, high inflation and operational challenges as part of a strategic move to focus on its core, profitable South African businesses.
Mr Price itself has a mixed international track record. Past attempts to expand into Nigeria, the Middle East and Australia failed, largely because the company did not fully understand those markets.
But CEO Mark Blair previously said that this time it is different. He argued that the NKD deal is based on deep research, hard lessons from past mistakes, and a far more disciplined approach.
“The deal is worth the short-term disruption,” he said, calling it a necessary investment to secure future growth and scale.
The company plans to host a capital markets event later in the first quarter of 2026 to provide more details on the deal. Until then, the stock performance begs for proof, not promises.
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