ANALYSIS | Why Mr Price's Nigeria exit makes sense

Mr Price store front in mall. (Supplied - Mr Price Group)
Mr Price store front in mall. (Supplied - Mr Price Group)
Mr Price Group
  • Mr Price has announced that it will be exiting Nigeria this year.
  • The retail group has already closed four out of its five Nigerian stores and has taken the associated impairments of leaving Nigeria into consideration.
  • This leaves PEP as the only SA clothing retailer that still has operations in Nigeria.
  • One analyst says it does not make sense for any foreign clothing retailer to operate in Nigeria.

Mr Price has become the latest South African clothing retailer to exit Nigeria.

The affordable clothing, sports goods and homeware retailer announced during the presentation of its results for the year ended in March 2020 that it has decided that it will be best to exit Nigeria in the first half of its 2021 financial year.

Mr Price has already closed four out of its five Nigerian stores and expects to close the last one in the coming months. 

Mr Price joins other clothing retailers such as Woolworths and Truworths who also closed their Nigerian chapter in recent years. The retail group first announced in 2019 that it was revaluating its international strategy and that it had commissioned an external review of the Nigerian operations.

Veteran retail analyst, Syd Vianello said as a clothing retailer, it made sense for Mr Price to leave Nigeria because apart from its struggling economy, there are also issues with getting clothing imports into the country.

"The stuff is subject to excessive duties. It lies at the ports for ages before it could be cleared. The currency has been devaluating and quite frankly, there is no logic in being in Nigeria at all," he said.

He said it is evident from the Shoprite numbers that there are difficulties in that country for the retail sector in general. And apart from Shoprite and PEP which still has few stores there, Vianello said he doubts there are any other SA retailers who still have an interest in that market.

SA is the growth market

During the results announcement this week, Mr Price CFO Mark Stirton said the company now wants to concentrate more on its SA operations which is why it has also discontinued its operations in Poland and Australia.

SA made up 92.5% of Mr Price sales anyway in the year to March 2020. Botswana and Namibia are the only sizable operations the group has outside of SA. Nigeria contributed 4% of the group's sales outside of SA and that business shrank 26.6% in the past year.

US research firm, Nielsen has looked at how urban growth population and rise in middle class households has attracted many retailers to compete for consumers’ wallets in Nigeria. However, the formal players have found the country a tough nut to crack because its retail environment is highly fragmented and is mainly based on the informal sector

Apart from the fact that Mr Price generates more than 90% of its sales in SA, the group's CEO, Mark Blair also pointed out that the retailer's profit margins have been improving inn SA and were good relative compared to last year's.

The group is probably one of very few companies that boasts not having a lot of underperforming stores in SA. When retailers like Woolworths reported disappointing sales around periods like Black Friday, Blair said Mr Price was recording some of its best performance for the year and gaining market share.

"In fact, it's very few that are loss-making and those tend to be clear end stores and it's by design," said Blair.

Even in the first two months past lockdown, he said the group-maintained margin growth while some retailers have been forced to heavily discount their fashion to keep stock moving from shelves.

Going forward, Blair said the group does expect margins to come be under pressure as retailers who are under distress discount more of their stock, but Mr Price doesn't anticipate mass store closures, especially as its new stores are located outside big regional areas and are in more remote locations that allowed them to perform well.

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