Truworths reaches sales milestone, earnings per share rise

FASHION retailer Truworths International yesterday reported a 10.7% rise in group retail sales for the 52 weeks ended June, amid an increasingly challenging consumer environment for retailers.

CEO Michael Mark said yesterday trading conditions had become difficult throughout the financial year, with the first half, being “materially better than the second half”.

Besides its flagship Truworths chain, the group’s retail brands include Identity, Daniel Hechter, Elements, Inwear and LTD.

“It’s not a bad result, but it’s not what we hoped for when we started the year,” Mr Mark said.

Truworths’ fully diluted headline earnings per share increased by 8.4% to 560.7c, equating to a 12.2% increase if the effect of the additional trading week in the prior 53-week period was excluded.

A “massive achievement” for the group was reaching the R10bn retail sales mark for the first time, Mr Mark said. Retail sales in the year were R10.1bn.

The group’s operating margin declined slightly to 34.5% due to bad debt, although Truworths’ operating margin remained above average, he said.

Mr Mark said bad debt, which grew as a percentage of the debtors’ book from 7.9% to 10.4%, “is a challenge at the moment”.

This affected Truworths’ ability to expand its sales, credit and new account growth.

There was growing evidence of the slowdown in consumer spending, with the latest retail statistics being “more pedestrian” than before.

However, Mr Mark said, “It’s part of a cycle, which we’ve been through before — we will get through it as we normally do”.

The group’s debtors’ book grew by 11% to R4.2bn and the active customer account base increased by 6% to about 2.6million accounts.

The group’s strategy was “a continuation of what we are doing, which is expanding our real estate space by about 8% a year”, including “developing our footprint throughout the African continent”, Mr Mark said.

Truworths opened a net 35 new stores during the period, bringing the number of stores to 604 at year end.

This number includes 40 stores outside of SA, where 11 new outlets were opened in the period across Lesotho, Zambia, Ghana and Nigeria.

Mr Mark said Truworths would also continue its focus on launching more brands.

The group’s total annual dividend for the year increased by 11% to 362c per share.

Mr Mark said retail sales for the first seven weeks of the 2014 financial period reflected an increase of 12.2% on the same 2013 period.