Truworths International was committed to Nigeria and would not follow Woolworths out of the country, South Africa’s largest publicly traded clothing chain has said.
The growth potential of Africa’s biggest economy outweighed high rental costs and difficulties in obtaining supplies, chief executive Michael Mark said in an interview.
“We were making losses, but I don’t think we will in the future,” he said of Nigeria.
The retailer planned to reduce the size of its four stores in the country to cut costs and would reconsider the type of clothes for sale to appeal more to local customers, he said.
Food and clothing retailer Woolworths said in November last year that it would close its three Nigerian outlets.
Challenges in Nigeria included transporting inventory to stores through clogged traffic and understanding what the customer wanted, Mark said.
South African retailers are expanding in sub-Saharan Africa to offset tougher competition and shrinking household incomes in their domestic market.
Nigeria’s population of about 170 million and economic growth of 6.4 percent last year make it a key target destination. Truworths has two stores in Lagos, the commercial capital, and two in Enugu.
The retailer, which also sells jewellery and cellphones across about 600 South African outlets, in February reported first-half profit that was little changed on the previous year.
Mark said he planned to restrict the pace of store openings in the domestic market. “We are trying to contain it. This year it’s going to be quite high at about 9 percent.” Truworths’s target was to increase store numbers by about 6 percent next year and 3 percent to 4 percent in 2016, he said.
While Truworths was focused on getting the shop size and product mix right in existing Nigerian stores, it might also look to increase the number of outlets and expand into new cities, Mark said.
The company, which has more than 40 shops in Africa outside South Africa, plans to have about 10 stores in each country in which it operates over the next five or six years, he said. Growth would come in countries including Zambia, Ghana, Mauritius and Kenya.
“We would go to a new city if the logistics are logical and there is a big enough population and other big retailers are going there. We don’t see ourselves as stand-alone attractions, we want to be in the pack and then out-trade the others.”
Truworths shares rose 2.11 percent to close at R74.02 yesterday, paring the decline for the year to 5 percent. That compares with gains at competitors Foschini and Mr Price.
Foschini is seeking to more than double the number of stores in Africa outside South Africa to about 300 by 2018, while Mr Price said sales in Nigeria and Ghana almost doubled in the year through March.
“We think there are long-term opportunities and that might come quicker than you think,” Mark said. – Bloomberg