Truworths account and cash sales down
Retail decline impacts shares
CAPE TOWN-based fashion retailer Truworths International traded 2.64 percent weaker to close at R75 a share following a disappointing 3 percent decline in retail sales to R5.5 billion in the 17 weeks to October.
The company said the subdued sales were as a result of the inclusion of a 53rd week in the prior period.
Truworths, which operates the UK-based footwear business Office and whose brands include Uzzi, said both account and cash sales were down 3 percent compared to the previous 17 weeks. It said the sales had declined 2 percent to R4bn during the period.
Office sales declined marginally at 1 percent in sterling terms at £89 million (R1.6bn) but decreased in rand terms during the period.
The group said its trading space had increased by 1 percent on the prior period and was expected to increase by 2 percent for the full financial period.
“Although the trading environment is expected to remain challenging, the group will continue to utilise its extensive experience to manage the risk of fashion through its proven merchandise design and buying processes and manage the risk of the book through continuing to apply strategies to ensure the on-going health of the portfolio,” the company said.
The local retail sector is under pressure as cashstrapped consumers curtail spending owing to the dire economic environment which has resulted in the closure of retailers and the down-scaling of others.
Alec Abraham, a senior equity analyst at Sasfin Wealth, said yesterday that the retail figures were slightly below market expectations, with the significantly lower product inflation contributing to the poor sales growth performance.
Abraham said the company’s top line was likely to continue trading under pressure.
“The outlook for the key drivers of retail spending, namely employment and real wages, remain poor, with the economy in dire straits, and so we cannot expect better numbers,” said Abraham.
He added that the entry of international players into the South African market had also been problematic for Truworths.
Abraham said the retailer was also vulnerable to in- creased competition in the sector.
“I do not think that Truworths has done enough to defend its turf against international retailers,” he said, adding that the UK market was also subdued as consumers remained wary of the impact of Brexit on their wallets.
“Based on the official retail statistics, it appears Office has done worse than the overall apparel and footwear segment in the UK.”
Truworths’ group results for the 2017 financial year, released in September, saw diluted headline per share close a marginal 0.8 percent lower year on year to 660.9 cents per share.