JD Group Rises as Retailer Seeks Growth in Rural South Africa

JD Group Ltd. (JDG) rose the most in more than three months as the South African furniture and appliance retailer said it plans to open at least 50 stores in rural areas across the country in the current fiscal year.

The stock climbed 2.5 percent to 41.51 rand at the close in Johannesburg, the biggest gain since May 16.

JD Group plans to expand as it seeks to benefit from South Africa’s lowest interest rates in at least three decades and above-inflation wage increases.

“We are quite optimistic about the outlook for our customers; with interest rates having dropped and wage increases of between seven percent and nine percent, it means more money in customer’s pockets,” Chief Executive Officer Grattan Kirk said in a phone interview from Johannesburg today. “Over the last few years durable goods have underperformed other goods such as clothing, and so now is the time people are looking to replace couches, fridges and other appliances.”

The stores planned for the more rural areas will be as much as 40 percent smaller than the average store in larger cities, Kirk said.

The company will also be looking to expand its customer loans business through its retail branches, even as it maintains its “cautious approach” to credit by limiting unsecured loans to a maximum of 24 months and top loan amount of 25,000 rand ($2,977), Kirk said.

Net income in the 10 months to June 30 rose 26 percent to 877 million rand, compared with the 12 months through August 2011, Johannesburg-based JD Group said in a statement today. Debtors’ costs fell 38 percent to 417 million rand. JD Group’s financial year-end has changed from Aug. 31 to June 30.

To contact the reporter on this story: Janice Kew in Johannesburg at jkew4@bloomberg.net

To contact the editor responsible for this story: Celeste Perri at cperri@bloomberg.net

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