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Truworths to stay put in Nigeria

Says growth potential outweighs high rent and supply problems.

Truworths International, South Africa’s largest publicly traded clothing chain, said it’s committed to Nigeria and won’t follow Woolworths out of Africa’s most populous nation.

The growth potential of the continent’s biggest economy outweighs high rental costs and difficulties in obtaining supplies, Chief Executive Officer Michael Mark said in an interview at the company’s headquarters in Cape Town.

“We were making losses, but I don’t think we will in the future,” Mark said of Nigeria. The retailer plans to reduce the size of its four stores in the country to cut costs and will also reconsider the type of clothes for sale to appeal more to local customers, he said.

Woolworths said in November it would close its three Nigerian outlets. Challenges in the country include transporting inventory to stores through clogged traffic and understanding what the customer wants, according to Mark of Truworths.

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 target destination. Truworths has two stores in Lagos, the commercial capital, and two in the inland city of Enugu.

Store openings

The retailer, which also sells jewelry and mobile phones across about 600 South African outlets, in February reported first-half profit that was little changed on the previous year. Mark said he plans to restrict the pace of store openings in the company’s domestic market.

“We are trying to contain it,” the CEO said. “This year it’s going to be quite high at about 9%.” Truworths’ target is to increase store numbers by about 6% next year and 3% to 4% in 2016, he said.

While Truworths is focused on getting the shop size and product-mix right in existing Nigerian stores, it may 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 of South Africa, plans to have about ten stores in each African country in which it operates over the next five or six years, he said. The growth will come in countries including Zambia, Ghana, Mauritius and Kenya.

Logical logistics

“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,” Mark said. “We don’t see ourselves as stand- alone attractions, we want to be in the pack and then out-trade the others.”

Competitor Foschini is seeking to more than double the number of stores in Africa outside of 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.

©2014 Bloomberg News

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