Truworths pursues bank-style credit stance

TRUWORTHS, the giant clothing chain that exclusively targets middle and affluent classes, said it had decided to pursue a cautious credit stance in order to skirt potentially damaging defaults in Zimbabwe, where incomes have been battered by a poorly performing economy.

It is a similar system that banks, estimated to be sitting on US$1,7 billion in idle liquidity, have been pursuing since volatilities returned in 2019, following radical monetary policy shifts.

Banks saw non-performing loans plummet to 0,3% in August 2021, after hitting about 20% at one point, demonstrating how the strategy has saved them the headache of chasing debts in a troubled market.

On Friday, Truworths chief executive officer Themba Ndebele said the bank-style stance was working.

Truworths’ book grew by 152,8 % during the full year to July 11, 2021 with 84,8% of clients in good standing.

This figure was a significant rise from 80,3% of credit clients who were in good standing during the comparable period in 2020.

In a commentary to financial statements, Ndebele said doubtful debts allowance as a percentage of gross debtors slowed to 6,7% during the review period, compared to 13,4% in 2020.

“The business remains focused on growing profitability sustainably,” Ndebele said.

“Consumer incomes have not recovered to pre-devaluation levels hence credit granting will remain cautious and the emphasis will remain on increasing cash sales participation,” he added.

He said after being excluded from a list of industries classified by government as offering “essential services” when the third wave of COVID–19 swept through the country in January, Truworths revenues took a tailspin.

“The closure of the business in January and February resulted in a loss of sales for the two months,” the Truworths boss said.

“In the absence of a relief package, the business incurred the full operating costs for the months of January and February which resulted in a trading loss for the quarter and half year.

“Any future hard lockdowns will obviously have a negative impact on business performance.

“The business was classified as non-essential hence the closure. The factory did not receive specialised winter fabrics for garment manufacture.

“The retail chains relied on purchasing the limited and non-exclusive ranges from local manufacturers.

“Stock turnovers were good and there were no markdowns. Gross margins were firm,” Ndebele said.

Inflation adjusted revenue fell to $286,9 million during the period, compared to $341,6 million during the comparable period in 2020.

The firm reported a $67,6 million loss during the review period, compared to a $19,3 million profit in 2020.