PATTERN FOR SUCCESS
Truworths buys Naartjie in bid to expand kidswear offering and raise sales volumes
IN A BID to grow its market share in the kidswear market, Truworths yesterday acquired children’s fashion retailer Naartjie. Last month it bought Earthchild.
Truworths shares gained 3.25 percent to close at R75.52, the biggest jump in almost three months.
Outgoing chief executive Michael Mark said: “I believe Naartjie has excellent growth potential after an initial consolidation phase and will reinforce our growth prospects in the kidswear market.”
The listed retailer said it had entered in to an agreement with Naartjie to buy its 26 stores. It added that the involved parties had agreed not to disclose the price of the deal, which would be settled in cash.
The deal is awaiting approval from the US courts, given that Naartjie's US-based holding company is in bankruptcy proceedings.
Truworths has had a hard time increasing its sales volumes this year as consumers struggle to pay for their credit store accounts and fail to access credit. Consumers are grappling with rising costs, a weak job market and high levels of indebtedness.
The retailer is sitting on a cash pile of about R1.6 billion and has been looking for viable acquisitions.
Naartjie was founded in Cape Town in 1989 and sells ranges of clothing, accessories and footwear for newborn to 10-year-old children from 26 stores across South Africa.
The company was taken over by US investors in 2001. Naartjie has 55 stores in the US and e-commerce business shipping clothes to more than 200 countries. The US assets are not included in the Truworths acquisition.
Mark said Naartjie would add scale to Truworths’ kidswear offering.
The retail group also recently announced its intention to acquire the Earthchild business, which will add a network of 43 stores to Truworths’ 600 outlets across the country. The effective date of the acquisition is the first quarter of 2015.
Truworths also owns the Identity, Uzzi and YDE brands.
He said Earthchild and Naartjie together with the retailer’s LTD Kids range would enhance its children’s emporium brand appeal.
“We are committed to providing the necessary financial and other resources to place Naartjie business on a sustainable footing and, thereafter, increase a number of outlets, introduce a credit facility for customers in due course and possibly expand the operations beyond South Africa.”
Mark has decided not to renew his contract, which expires at the end of June.
He will be replaced by Jean-Christopher Garbino, who has international experience.