Mr Price’s opinion-splitting acquisition of European value fashion retailer NKD, quite curiously, had some familiar elements — and threw up a name that many readers might associate with probably the biggest corporate disaster in the history of the JSE. That, I must stress, has little bearing on the merits of the NKD deal, but is a reminder that the German-based company is an asset that has been peddled a few times in the past 25 years or so.
I feel a bit sorry for Mr Price, what with the share price being unceremoniously pummelled after the deal announcement. I’m no retail company expert, but I’m fairly certain Mr Price has a better, longer record in capital allocation than most of its peers.
I don’t really think it serves any purpose to reel off the awful deals some retailers have pursued offshore over the decades … or the costly retreats from them. But I distinctly recall the euphoric responses from the market when those deals were first announced — which starkly contrasts with the acerbic reaction from investors to Mr Price’s proposed acquisition of NKD for almost R10bn.
Perhaps it is a timely reality check, but hopefully one that Mr Price’s executives can convincingly and positively frame in 2026. For now, the market is disappointed and highly sceptical. The deal, I know, has caused at least one enthusiastic Mr Price backer to flip out.
For the record, NKD, specialising in affordable apparel and homeware, has 2,108 stores across Germany, Austria, Italy, Slovenia, Croatia and the Czech Republic. On paper, the NKD business model is not far removed (geography aside) from Mr Price’s, and even bears some resemblance to Pepco — which came out of the Pepkor-Steinhoff stable (remember this reference).
It is also a region where some JSE listed property stocks have ventured … some rather successfully. But it is a big deal, representing roughly a fifth of Mr Price’s market value. Investors might understandably be fretting about possible execution risk, especially with Mr Price not having vast experience of offshore retailing. The market also seems a little wary of the price that Mr Price is forking out, and the fact that there are no detailed financial results to be scrutinised.
Investors might understandably be fretting about possible execution risk, especially with Mr Price not having vast experience of offshore retailing
Mr Price says the deal is a transformational step in its long-term growth strategy. I disagree. It is a pants-splitting lunge rather than a step. We are told that NKD generated revenue of €685m in financial 2024 — which, as a top-line reference point for a €487m deal, is not going to raise too many eyebrows. A little more concerning is that NKD’s net profit after tax for financial 2024 came in at R260m and for the half year to end-June 2025 the net profit (stripping out debt refinancing and hedging derivative valuation charges) was R129m. Work that back to the purchase price, and we are staring at some rather heady multiples … certainly much more demanding than the average earnings multiple that is currently slapped on the JSE rag traders.
The recent corporate history of NKD is also worth sifting through. The business was acquired by OpCapita in 2013 for about €20m. The seller was Daun & Co, which had owned the business for a dozen years or so. Daun should ring a few bells with older readers, who might remember its prime mover Claas Daun as an investor with a penchant for South African sunset industries, and especially clothing and textile manufacturers. Daun, of course, was a significant minority shareholder in Steinhoff, the acquisitive consumer industry conglomerate that imploded in nightmarish fashion in 2017.
I have to wonder whether Daun & Co ever tried to shop NKD to Steinhoff, which had some enthusiasm for pushing into Eastern and Southern Europe? In any event, OpCapita — reading between the lines of media statements and reports — did a fine job of turning a struggling NKD around. By early 2019 it offloaded its stake in NKD to private equity group TDR Capital for what industry insiders reckoned could have been between €300m and €350m (about R4.65bn and R5.42bn at the time), though the price was not formally disclosed.
Six years later some wide-eyed South Africans turn up and are willing to stump up €487m. It just doesn’t look good, though that assumes a good deal of sceptism about whether Mr Price can achieve what most other ambitious fashion retailers could not — that is, secure sustainable returns convincingly above the cost of capital.
The media release from NKD is instructive — especially the bit about markedly expanding NKD’s retail footprint, which, of course, TDR Capital would probably not have been enthusiastic about funding. The group noted: “The new owner, Mr Price Group, opens up additional opportunities for NKD. Mr Price Group understands retail, knows the dynamics of the market, and shares NKD’s focus on value and a flexible, scalable growth platform. The acquisition marks the beginning of a new phase of expansion for NKD.”
So, in the medium term, NKD plans to expand its store network to 3,000 with the long-term aim “to reach 4,000 stores across Europe”. At least NKD boss Alexander Schmökel referred to “sustainably” expanding the group’s market position in Europe, which adds a smidgen of prudence to the ambitious growth plans.
I don’t think I’ve ever been a Mr Price shareholder, but it’s a business with an enviable record of long-term delivery. Mr Price could very well stun the sceptics, but I’d still be far happier watching developments over the next few years from the safety of the sidelines.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.