During their most recent Annual Results Presentation Webcast, the Mr. Price Group announced their plans to exit their Nigeria business. The publicly traded retail company with headquarters in South Africa has apparel, homeware and sportswear stores in its portfolio. According to their website, the group is in 1,323 stores globally, 5 of which were originally in shopping centres within Nigerian cities such as Lagos, Abuja, Port Harcourt and Warri. Only the outlet in Ikeja City Mall – Lagos, however, currently remains.
The retailer intends to completely exit the country during H1:2021 and the business will be presented as a discontinued operation from that point. This exit, alongside anticipated consumer distress in South Africa due to COVID, has resulted in the group increasing its impairment provision from 7.5% at the half-year to 10.4% at year-end.
Moving forward, the group intends to focus on fewer but more impactful opportunities by:
- Removing and exiting markets referred to as ‘distractions’ such as Australia, Poland and Nigeria.
- Reviewing franchise operations, respectful of contractual rights.
- Investing in the long term growth areas including e-commerce.
- Focusing on South Africa where they understand the market and customers, have clear competitive differentiation and have seen historically excellent returns.
South Africa plays an important role in the Nigerian real estate industry as key retailers including Shoprite, Game and other retailers such as Mr. Price take anchor and sub-anchor space in retail centres.
In their most recent interim results presentation for the 26 weeks to December 2019, Shoprite Holdings posted an 8.1% decline in constant currency sales, the worst of the 4 key Non-South Africa markets that the group operates in.
Sun International, one of Africa’s largest tourism, leisure and gaming groups, who are part owners of Federal Palace Hotel also made their intentions to exit Nigeria known. In their June 2020 Business Update, they mentioned that progress on the disposal of Federal Palace is being made. Among other initiatives, they expect the disposal to augment their liquidity position in the medium term.
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