Truworths to start lay-byes in SA

Fashion retailer Truworths, which earns nearly 70% of its revenue in SA from credit sales, is rolling out a lay-bye option in an attempt to boost sales in a tough economic environment. The option could add 2% in additional sales, CEO Michael Mark said.

Fashion retailer Truworths, which earns nearly 70% of its revenue in SA from credit sales, is rolling out a lay-bye option in an attempt to boost sales in a tough economic environment.

The option, which allows customers to pay off an item over a period of time before taking ownership of it, could add 2% in extra sales, CEO Michael Mark told Business Day.

Lay-byes have been tested over the past year in about 20 stores, and the plan is to roll it out widely by the fourth quarter of 2018, he said.

The century-old retailer, whose brands include YDE in SA and Office in the UK, blamed a tough economic environment in SA and the UK for its lacklustre performance.

Merchandise sales declined 2.7% year on year for the 52 weeks to R17.5bn, while headline earnings per share were down 5% to 615.7c. These numbers are somewhat skewed as the prior year had 53 weeks.

“There are always product mix issues [that affect sales]. But what we are seeing now is a slump across the board, in all different departments, in all areas,” Mark said. The lacklustre performance is “much more about the economy” than about competition from international retailers, he said.

Consumer spending remains under pressure in SA due to “low economic growth, high levels of unemployment and the continuously rising cost of living”, Truworths said.

In the UK, consumers are “despondent” over Brexit, which has weighed on the economy, while the shift to online shopping has also hurt traditional retailers, Mark said. Retail sales for the group’s Office chain decreased by 4.5% to £281m.

Truworths’ focus is on containing costs, maintaining and improving the quality of its debtors book — which Mark described as “looking fantastic; the best in four to five years” — and aggressively building its ecommerce business in SA.

It will also continue closing “bad stores”, keep improving its product mix and ensuring it gets its prices right, Mark said.

With a debt to equity ratio of only 9.3% and strong cash-generation abilities, Truworths is well positioned to make further acquisitions. It has most recently acquired Loads of Living.

“Even though we can afford it, it would be difficult for us to sell a big acquisition to shareholders right now,” Mark said.

Investors would first want to see further signs of improvement at Office, which it bought for R5.5bn at the end of 2015, a few months before the shock Brexit vote, although small opportunities in the UK may arise, he said.