Clothing retailer Truworths International plans to boost its offering to children after completing the purchase of high-end chain Earthchild Clothing for an undisclosed cash sum.
The proposed acquisition of the closely held owner of the Earthchild and Earthaddict brands would add a network of 43 stores to Truworths’ 600 outlets across the country, the Cape Town-based company said yesterday. The deal is conditional on due diligence and regulatory approvals.
“We are committed to providing the necessary financial and other resources to increase the number of Earthchild and Earthaddict stores relatively rapidly, introduce a credit facility for customers and grow the operations beyond South Africa,” Truworths chief executive Michael Mark said in the statement.
The brands “reinforce our growth prospects” in childrenswear, he added.
Truworths, which also sells jewellery and cellphones, had R1.59 billion in cash as of June 29, up 20 percent from a year earlier.
The retailer last made an acquisition in 2006, when it bought a controlling stake in local fashion retailer Uzzi for an undisclosed amount.
While the company had looked at buying a number of other businesses since then, the owners demanded a higher price than Truworths was willing to pay, Mark said in 2012.
South African retailers have been struggling this year as rising inflation and unemployment of more than 25 percent hurts consumer spending.
Truworths sales growth slowed to 6.8 percent in the 52 weeks through June, compared with 11 percent the previous year, the clothing retailer said on July 18.
The shares climbed 1.4 percent to R71.72 at 3.26pm in Johannesburg, paring the decline so far this year to 6.6 percent. However, the shares closed only 0.34 percent higher at R71.
Truworths has a return on equity of about 37 percent, compared with 26 percent and 52 percent at competitors The Foschini Group and Mr Price Group respectively, according to data.
Earthchild, founded in 1994, sells children and womens’ clothing made from organic fabrics.
The effective date of the acquisition is expected to be in the first quarter of next year, Truworths said.
Earthchild chief executive and co-founder Jonathan Katz will continue in his current role for at least three years as part of an earn-out agreement. – Bloomberg