Operating environment to remain constrained
ZIMBABWE Stock Exchange-listed clothing retailer Truworths believes the short to medium-term environment will remain constrained amid diminished consumer purchasing power and persistent Zimbabwe dollar liquidity shortages.
The projection, which forms part of the clothing retailer’s results for the full year to June 2020 released this week, comes at a time consumer disposable incomes have been eroded by high inflation levels which reached a 10-year record high of 837 percent in July this year.
The comment comes as the central bank has put in place tight money supply controls as part of its currency stabilisation measures.
Reserve Money Supply in the economy has averaged below $15 billion since June 2020 leaving economic players with little room to manoeuvre resulting in reduced sales volume for businesses.
For Truworths, the number of units sold for the year under review was down 57.5 percent on a like for like basis. Overall sales volume was down 59.9 percent.
Management said the second half period ( January to June 2020) was negatively affected by the Covid-19 lockdown.
“Our stores were closed from the last week of the trading month in March 2020, all of April and for 2 weeks in May.”
Product availability was also constrained during the reporting period due to foreign currency unavailability and pricing constraints, according to management.
International supply chain disruptions due to Covid-19 are also expected to continue to impact the business.
Due to hyperinflation conditions, Truworths had to change its credit-granting policy and terms, but this resulted in active accounts decreasing by 0,5 percent.
The tenure of the credit period was reduced and monthly interest charges were reviewed upwards. The doubtful debt provision as a percentage of gross debtors was 13,5 percent compared to 15,2 percent in the prior period.
Management said despite the debtors’ collection teams working virtually, the collections for April and May were acceptable.
Meanwhile, revenue for the period under review was down to $165 million from $179 million in inflation-adjusted terms.
Sale of merchandise accounted for $150 million while $12,7 million was in interest receivables.
While sale of merchandise was almost at the same levels as last year, there was a significant 45 percent drop in interest receivables from $23,3 million prior year comparative. This could be attributed to the shift towards cash sales.
Revenue from service fees also fell to $1,9 million from $4,5 million.
While revenue was falling, trading expenses and finance costs were on the upside resulting in the owner of Truworths Stores, Number 1 and Topics reporting a reduced profit for the period of $9,3 million down from $64,5 million prior year comparative.