February 19, 2016

Currency Woes and Rising Costs: South African retailer Truworths Exits Nigeria

Kayode Ola

South African retailer Truworths closed its two remaining Nigerian Stores last month, citing tough restrictions on stock imports and rising cost of rent. According to a statement by the company’s CEO Michael Mark, the fashion company struggled to import stock into and take cash out of Nigeria. In a telephone interview with Reuters, Mark explained that they were unable to operate the stores properly because of an inability to send merchandise to the stores as a result of the regulations preventing that. Of all the African countries the Truworths Group operates in, Nigeria was the only one that saw negative sales growth from Year End 2014 to Year End 2015.

“We can’t get money out, so there was no point any longer.”

As part of its 2016 strategy outlined in their Integrated 2015 report, the company had planned to open additional stores in Nigeria, however the difficult operating environment made it hard to proceed with this strategy. “The stores in countries bordering South Africa are doing well and in Ghana it’s O.K.”, he added in another interview with Bloomberg Africa. This development brings to an end the company’s five-year stint in the country. In 2013, a more upbeat Mark had indicated that although its Nigeria stores were loss-making, it intended to see out the three-year leases on each of those stores, with the view to opening more stores in the country.

Earlier this year, sales at Mr Price’s Nigerian stores (South African owned) slowed after foreign exchange restrictions from the Central Bank of Nigeria also resulted in delays of merchandise being imported into the country. Another South African food-and-clothing retailer, Woolworths Holdings Ltd., closed its three stores in Nigeria citing high rental costs, duties and difficulties with its supply chain just after 18 months of entry into the country’s retail space.

Founded 98 years ago in Cape Town South Africa, the retailer also sells jewelry and mobile phones across 745 stores across Africa, including 44 corporate-owned stores in 8 countries outside South Africa. Credit is offered to customers across its brands in South Africa, Namibia, Swaziland and Botswana to facilitate sales in the Group’s mass middle-income target market. Despite the challenges it faced in Nigeria, the did favourably well in the country. It’s half year retail sales for the period ending Dec, 27, 2015 increased by 36% to 550 million USD, it also purchased a U.K shoe chain Office Retail in a deal valued at 385 million USD.

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