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Pepkor to double Nigeria stores to target middle class buyers
1. Pepkor to double Nigeria stores to target middle
class buyers
Apr 30 2015 08:57 Yinka Ibukun
COMPANY DATA
STEINHOFF INTERNATIONAL HOLDINGS LTD [JSE:SHF]
Last traded 76
Change 1
% Change 1
Cumulative volume 6942503
Market cap 0
Last Updated: 08-05-2015at 05:00. Pricesare delayed by 15 minutes. Source: McGregor BFA
Johannesburg - Pepkor, the clothing retailer bought by Steinhoff International Holdings for
R68.4bn ($5.7bn) in 2014, plans to double its presence in Nigeria with 10 store openings per
year through 2018.
The company opened its first outlet in Africa’s most populous country in 2012 and will have 31
stores by July, Deon Conradie, Pepkor Nigeria’s general manager, said in an interview on April
27 in his office in Lagos, the commercial capital. The clothing and footwear chain plans to sustain
that growth rate over the next three years, he said.
2. “‘Our prices are low and we cater for that middle-to- bottom market, which is the fastest growing,’’
Conradie said. ‘‘There’s a need for somebody to supply that market.’’
Nigerian demand for goods other than food is expected to increase to $110bn in 2030 from
$20bn two years ago as Africa’s biggest economy grows and its working and middle classes
seek alternatives to outdoor markets, according to McKinsey & Co. While a 40% fall in oil prices
since June has curbed growth in the continent’s biggest crude producer, the economy is forecast
to expand 5% in 2016, the International Monetary Fund said on April 28.
Entry to the Nigerian market requires relatively high capital investment due to inflated rental and
power costs, according to Conradie. Woolworths Holdings [JSE:WHL], which targets wealthier
consumers, said in 2013 it would close its three Nigerian stores because of costs and difficulties
with getting products to shops.
Mall developments
‘‘I think anyone coming into the market who wants to have stand-alone stores is going to pay
some expensive school fees,” said Conradie, adding that new mall developments by companies
including Johannesburg-based Resilient Property Income Fund may lead to reduced costs. “It
can sometimes take three to four years to be profitable in these environments,” said Conradie,
who has also worked in Angola.
Steinhoff [JSE:SHF], a Johannesburg-based furniture retailer, agreed to buy Pepkor in
November to expand into clothing and new countries. The deal, the largest purchase of a South
African company in more than a decade, will create a retailer spanning three continents.
Steinhoff shares have gained 29% this year, compared with the 10% increase of the FTSE/JSE
Africa All-Share Index.
The increased size of Pepkor will allow it to buy more products for Nigerian stores in bulk, a way
to keep prices low in a country where shoppers are used to bargaining in markets, Conradie said.
The company is also attracting customers by allowing monthly payments for certain goods and is
considering electricity and television-subscription payment services in its stores.
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