Mr Price shares dive over pricey NKD expansion

Key topics:Mr Price shares drop 14% over €487M NKD acquisition concernsNKD will become Mr Price’s second-largest unit in EuropeMarket wary of high price vs earnings and thin margins of NKD.Sign up for your early morning brew of the BizNews Insider to keep you up to speed with the content that matters. The newsletter will land in your inbox at 5:30am weekdays. Register here.Support South Africa’s bastion of independent journalism, offering balanced insights on investments, business, and the political economy, by joining BizNews Premium. Register here.If you prefer WhatsApp for updates, sign up to the BizNews channel here..By Janice Kew and Khuleko Siwele.Mr Price Group Ltd. slumped amid market concerns that the South African clothing chain is overpaying for the retail business of NKD Group to expand in central and eastern Europe. The Durban-based specialist in mid-range apparel, sports goods and homeware will spend as much as €487 million ($567 million) on all of NKD’s retail unit as well as NKD’s shareholder-loan receivables, Mr Price said in a statement Wednesday.The stock closed 14% lower, extending its drop this year to 39% and giving the retailer a market value of 48.8 billion rand ($2.9 billion). The shares also started trading without the value of the next 3.23 rand dividend payment..Read more:.Mr Price’s boldest move in decades, bets R9.6bn to beat SA retailer graveyard .Mr Price will fund the purchase, which the retailer expects to finalize in the second quarter of next year, through a combination of existing cash and debt. With 2,108 stores across central and eastern Europe, NKD will become Mr Price’s second‑largest trading unit, with its existing senior-management team staying in place. There is “ample runway for further expansion,” Mr Price said. In 2022, Mr Price bought the seller of brands such as Adidas, Asics and Puma, to expand into more upmarket clothing. So-called strategic acquisitions now account for almost 30% of Mr Price’s sales.“It appears that the market may be concerned around the price/multiple at which the business is being acquired,” said Lester Davids, an analyst at Unum Capital Ltd. “Additionally, the price being paid in rand also appears to be substantial when compared to Mr Price’s own market capitalization.”Mr Price trades at 13 times annual earnings. NKD reported profit after tax of €13.1 million for the year ended Dec. 31, 2024, implying a multiple of 37 times annual earnings given the price that Mr Price is paying for the business.“The acquired business appears to operate on much thinner margins than Mr Price’s core operations,” said Salome Maruma, a co-portfolio manager at Mergence Investment Managers. It’s not the first time a discount-focused South African clothing retailer has expanded in the region. Mr Price’s move comes about two decades after larger local rival Pepkor Holdings Ltd. successfully expanded in Poland through what would become Pepco Group N.V. In South Africa, the largest clothing retailers are still expanding even as analysts have pointed to a degree of saturation. Still, “investors tend to be wary when domestic retailers embark on offshore expansion — the historical success-rate for such moves has been modest,” Maruma said. .© 2025 Bloomberg L.P.

Mr Price shares dive over pricey NKD expansion

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