Mr Price takes over European retailer in controversial R9.6 billion deal
Mr Price has taken control of European value retailer NKD, adding a large number of new stores to its base.
Mr Price announced its plan to acquire 100% of the shares of Pegasus Group Holding GmbH, which trades as NKD Group’s retail business, in December.
The deal was valued at €487.00 million (roughly R9.6 billion at the time) and was funded by a combination of cash and debt.
NKD operates in Germany, Austria, Italy, Croatia, Slovenia, the Czech Republic, and Poland, with over 2,100 stores. The company generated net sales of €684.57 million in 2024.
The reaction to the deal was largely negative, with R6 billion wiped off Mr Price’s market cap on the first day.
Prominent critics of the deal have included 36One Asset Management and Benguela Global Fund Managers.
Benguela said that the European retailer offers far lower margins, likely in the region of 1% to 2%, which are far below Mr Price’s typical margin between 9% to 14%.
It was also concerned by the billions in debt that the deal adds to Mr Price’s balance sheet. Mr Price’s balance sheet now includes R7 billion in interest-bearing loans.
Despite the reservations over the deal, Mr Price’s management has confirmed that NKD joined the group in March 2026.
“Clear areas of focus have been identified with the NKD management team, who are committed to achieving the guided forecasts communicated to investors,” the group said.
While the group’s acquisition of NKD came after the close of the financial year ended 28 March 2026, the group’s post-year-end April trade was challenging in both South Africa and Europe.
The group said confidence deteriorated amid the unexpected rise in inflation caused by the US-Iran conflict.
It added that trade improved into May and early June, and is confident that its value chain agility enables it to respond positively to changing conditions.
Financial results
For the 52 weeks to 28 March 2026, Mr Price Group increased total revenue by 4.2% to R42.7 billion.
That said, the group’s earnings were impacted by the expansion of all once-off transaction-related costs relating to the NKD deal.
When using normalised figures, which exclude those costs, basic, headline and diluted headline earnings per share increased by 8.0%, 7.7% and 8.0%, respectively, on a normalised basis.
On a statutory basis, basic, headline and diluted headline earnings per share of 1,449.5 cents, 1,453.9 cents and 1,411.8 cents, increased by 2.3%, 2.1% and 2.4%, respectively.
The group also declared a final dividend of 592.8 cents per share, maintaining its pay-out ratio of 63%.
While the group said that household income showed some signs of recovery in 2025, the discretionary retail sector was not an immediate beneficiary of this improvement.
The prior year’s results also benefited from withdrawals due to the introduction of the two-pot retirement system in South Africa.
Despite the challenging retail environment, the group still opened 196 new stores, supporting a weighted-average space growth rate of 3.6%.
Looking ahead, Mr Price CEO Mark Blair said that there is optimism about South Africa’s long-term prospects.
“However, the conflict in Iran has brought uncertainty in the short term, and we are focused on ensuring that we manage the impacts,” said Blair.
For FY2027, the group is expected to spend R1.1 billion in capital expenditure
in South Africa, with about 180 new stores, store revamps, supply chain and technology investment.
Given the introduction of structural debt, the group said that its focus on balance sheet and treasury
management will be prioritised.
In Europe, NKD’s capital expenditure is forecast to be €24m (R454 million) and incorporates about 150 new stores.
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