Furmart, the biggest furniture boutique in the country, issued warning bells about its impending regional expansion on Friday, saying that it was embarking on a rights issue targeted at regional markets.
Charles Wrightley, managing director of Furnmart, told the Sunday Standard that the rights issue is geared towards funding their expansion programme that started a few years ago.
“This is intended to finance our growth, which has been continuing for the past years,” he said.
The furniture boutique has established some Home Corp in Botswana, Namibia and South Africa ÔÇö especially in the rural areas as part of its larger plan of entering the biggest economy in the region. Further, it has one outlet in Zambia which has pushed the total number to over 70 outlets across the region.
The Botswana company took a conscious decision a few years ago to invade the remote northern areas of South Africa as part of taking back the challenge to former foes who retreated at the beginning of the century.
The company, which is headed by one of the top three richest men in the country, John Mynhardt, is operating along the Limpopo and Northweast provinces under the flagship Xtreme Discount.
Furniture Mart is proving to be one of Botswana’s biggest companies and has branches in Namibia and South AfricaÔÇöunder Xtreme stores. In South Africa, the company is mainly concentrated in the rural areas but it is thought that it will eventually move into the urban areas.
Two months ago, the company got applauses from a number of economic analysts over its performances, especially coming from a season of over-spending related to its expansion programme.
“Revenue grew by a stunning 31.7 percent to P 248 million. This was mainly driven by the increase in the number of stores during the year,” a researcher at African Alliance, Pulafela Isaacs said.
Under its new plan, the company is eyeing to increase its presence in the remote areas of South Africa targeting the burgeoning low and middle class as the country is experiencing the credit retail boom. The move is expected to compliment the profit margins in the mature markets of Botswana and Namibia where it is already a dominant player.
“South Africa has seen a huge boom in credit retail in the past two years on the back of low interest rates and retail optimism,” Stockbroker Botswana has said, adding that “the quality of debtor’ book will be of paramount importance to the success of the South African expansion and whilst current experience suggests that there is no cause for concern, the potential risk of increasing debts exists.”
Further, the company, which operates under Xtreme Discount is expected to benefit from the larger South African population which tops 40 million but it will face resistance from some of the already existing and Johannesburg Stock Exchange listed stores such as Ellerines and Joshua Doore, which have close to 200 outlets in that country alone.
“Management point out that the growth in the aggregate wealth of the lower and middle income earners, the credit pie in South Africa has got larger, allowing room for growth, particularly for niche operator,” the research note said.
“Furniture intends to continue expanding by opening new stores and currently several Xtreme and Home Corp sites are being examined. By July 2008, a further three branches are expected and are expected to be opened while four Furmart stores are expected to be expanded or revamped,” Makgatlhe said.
“We have been successful in opening our Home Store in Botswana, Namibia and South Africa,” he said, adding that “we are also looking at increasing our presence in Zambia,” Wringley said ahead of the shareholders’ meeting scheduled for April 25 of this year.
“We are very positive about Botswana and Namibian economies,” he added.
According to the plan more Home Corp stores are still to be opened in South Africa and Zambia – a move that might add some more cash to the company and its shareholders’ value.