Mr Price rethinks international strategy after leaving Australia

Mr Price Group’s new CEO wants the retailer to take a new approach to offshore growth after the group pulled the plug on its fledgling Australian business and as it considers doing the same in Poland.

The clothing, sportswear and homeware goods retailer has, until now, preferred to take an organic but circumspect approach when entering new markets outside Africa. In 2003, it closed six test stores in Chile. In April, it decided to walk away from its Australian experiment, which was not generating healthy enough margins, said Mark Blair, who took over as group CEO in January.

Mr Price is also “having a hard look at Poland right now” to determine whether it makes sense to keep trying in that market, which it entered in 2018 under the watch of then-CEO Stuart Bird.

A number of SA firms, including landlords, have turned to the Polish market in recent years in search of growth. While some have found success, private hospital group Life Healthcare also said this week that it is reviewing its operations in the country.

Blair said Mr Price has previously entered foreign markets on an organic basis — with limited local expertise and infrastructure. That strategy “has proven challenging and distracting”. In the future, it would more likely enter markets via partnerships through which it can put its large cash pile to use.

At the end of March, Mr Price had cash and cash equivalents worth R3.2bn on its books, its financial statements show, but Blair said Mr Price does not want a deal that would require hefty debt funding.

He revealed that the group had made an offer for an offshore operator several years ago, but walked away from the deal as it was overvalued. It evaluated another recently but shied away from that one too.

Mr Price will not “take the beaten path” by buying assets that are in the market and in demand, or that offer “scale for the sake of scale”. It would prefer to invest in smaller businesses with growth potential, Blair said.

For now, Mr Price’s international business, including other African markets, remains relatively small — SA still contributes 91.9% of sales.

The group’s shares surged 9.8% to R194.96 on Friday afternoon after it said total revenue grew 5.8% to R22.6bn in the year to end-March. Retail sales increased 4.4%, or 1.6% on a comparable-stores basis, to R20.9bn.

Headline earnings per share rose 6.2% and the company raised its dividend per share by the same quantum, to 736.2c.

Blair said SA’s national election result was “generally favourable”. 

“Hopefully this could be the start of an upward swing in the retail cycle, but any improvements are expected to be gradual and we are therefore anticipating a very tough first half of the new financial year,” Blair said. “The second half should see an improvement due to the base effect and impact of internal initiatives coming through.”

Meanwhile, Blair said Mr Price is reconsidering whether it wants to be in Nigeria following an external review of those operations. The market is tough given difficulties with the repatriation of funds and local procurement.

hedleyn@businesslive.co.za