Pepkor set to open 10 stores a year in Nigeria

03 May 2015 - 02:00 By Bloomberg
A man walks past a Pepkor store
A man walks past a Pepkor store

Pepkor, the clothing retailer bought by Steinhoff International Holdings for $5.7-billion last year , plans to double its presence in Nigeria with 10 store openings a year through 2018.

The company opened its first outlet in Africa's most populous country in 2012 and would have 31 stores by July, Deon Conradie, Pepkor Nigeria's general manager, said this week in an interview in Lagos, the commercial capital of Nigeria.

The clothing and footwear chain planned to sustain that growth rate over the next three years, he said.

"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 $110-billion in 2030 from $20-billion two years ago as Africa's biggest economy grows and its working and middle classes seek alternatives to outdoor markets, according to McKinsey & Co.

A 40% fall in oil prices since June had curbed growth in the continent's biggest crude producer, but the economy was forecast to expand 5% in 2016, the IMF said this week.

Entry to the Nigerian market requires relatively high capital investment because of inflated rental and power costs, according to Conradie.

Woolworths closed its three Nigerian stores because of costs and difficulties with getting products to shops.

"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 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 agreed to buy Pepkor in November last year to expand into clothing and new countries. The deal will create a retailer spanning three continents.

Steinhoff shares declined 1.18% to R75.58 on the JSE on Thursday, valuing the company at R267.6-billion. The JSE was closed on Friday for the May Day public holiday. The stock has gained 27.2% this year.

The increased size of Pepkor would allow it to buy more products for Nigerian stores in bulk, a way to keep prices low in a country where shoppers were 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 TV subscription payment services in its stores.