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.
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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.
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