Truworths slumps after tepid trade update

Retail sales in the Africa segment up by a ‘disappointing’ 0.2%, the group says.

The share price of Truworths International, the Cape Town-headquartered fashion, apparel, and homeware retailer, dropped by over 4%% on Thursday morning, following a disappointing four-month business update published on Sens.

The share price traded at R104.63 at around 11am – 4.60% down from the previous day.

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The retail group, with operations in South Africa and the United Kingdom (UK), saw retail sales increase by 2.8% to R7.2 billion for the first 18 weeks – from 1 July 2024 to 3 November 2024 – compared to the corresponding period in 2023.

Its retail footprint comprises Truworths, Office and Loads of Living.

Truworths Africa

The group says its retail sales in the Truworths Africa segment increased by a “disappointing” 0.2% relative to the previous reporting period.

Account sales increased by 0.4% and comprised 70% (similar to the previous period) of the segment’s retail sales. Cash sales decreased by 0.2%.

Online sales showed solid growth, up 38% over the period, contributing 6.4% of total retail sales.

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Truworths notes that although business and consumer sentiment in South Africa has improved since the formation of the Government of National Unity (GNU) earlier this year, trading conditions in South Africa remain challenging as the optimism has not yet translated into meaningful improvements in the disposable incomes of South African consumers.

“The prospects of higher GDP growth, lower inflation, stabilising cost of living and lower interest rates are expected to support consumer spending in the year ahead. However, the timing and extent of the impact thereof remain uncertain at this stage,” it adds.

Strict credit granting criteria

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During the 2024 financial period, the group enhanced its “account charge-off hold-back strategies”, aimed at identifying overdue active account customers with some likelihood of payment and rehabilitation by using behavioural risk scorecards and serving to delay their charge-off.

“This change results in an increase in accounts that are over 210 days in arrears in the active trade receivables portfolio, and accordingly the active account holders able to purchase. Overdue balances to gross trade receivables metrics at FY25-Q1 are not comparable to FY24-Q1,” the group notes.

Excluding accounts over 210 days in arrears, active account holders able to purchase, and overdue balances to gross trade receivables were unchanged relative to FY24-Q1 at 82% and 14%, respectively.

UK trading

General trading conditions in the UK remain suppressed as consumers adopt a cautious approach to spending.

Notwithstanding these conditions, Office UK has proved resilient, recording retail sales growth of 9.7% (in Sterling) relative to the prior period.

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In rand terms, retail sales increased by 8.1% to R2.5 billion (prior period: R2.3 billion). Online sales for the current period increased by 3.2% and comprised 42.9% of total retail sales (prior period: 45.6%). Trading space in the Office UK segment is expected to increase by approximately 10% for the 2025 financial period.

Truworths is expected to announce its interim results for the period ending 29 December 2024 on or around 27 February 2025.

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