Truworths Expands South Africa Kidswear With Naartjie Deal

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Truworths International Ltd. agreed to buy the South African clothes-retail business of Naartjie, boosting its childrenswear offering with a second acquisition in as many months.

The purchase for an undisclosed cash amount will add a network of 26 South African stores to Truworths’ 600 across the country, the Cape Town-based company said in a statement today. The deal has been approved by courts in the U.S., where Naartjie’s closely-held owner Naartjie Custom Kids Inc. is in bankruptcy proceedings.

South African retailers have been struggling to grow organically as high inflation and unemployment of more than 25 percent hurt consumer spending. Truworths announced the purchase of high-end kidswear chain Earthchild Clothing (Pty) Ltd. on Oct. 7, also without stating the price. The company generates most of its sales on credit, which has been in short supply as customers battle to pay back loans.

“Naartjie has excellent growth potential after an initial consolidation phase and will reinforce our growth prospects in the kidswear market,” Truworths Chief Executive Officer Michael Mark said in the statement. “Earthchild and Naartjie together with our highly successful L.T.D Kids range enhance the Truworths children’s emporium brand appeal.”

The company plans to improve Naartjie’s finances before adding stores and introducing a credit facility, Truworths said. It will then consider expansion outside South Africa, where the retailer has stores in countries including Nigeria, Namibia and Botswana.

U.S. Investors

Truworths shares gained 3.2 percent to 75.52 rand at the close in Johannesburg, the biggest jump in three months. The company had cash of 1.6 billion rand ($146 million) as of the end of June, about 20 percent more than a year earlier.

Naartjie, an Afrikaans word for a type of citrus fruit, was started in Cape Town in 1989 and taken over by U.S. investors in 2001, according to the company’s website. Naartjie Kids USA, based in Salt Lake City, has 55 stores and an e-commerce business shipping clothes to more than 200 countries. The U.S. assets aren’t included in the Truworths acquisition.