Truworths moves to stem write-downs

ZIMBABWE Stock Exchange-listed clothing giant, Truworths, says it will bolster cash sales and avoid piling up debtors on its books in a market that has struggled to stimulate spending following a gruelling meltdown.

Truworths’ financial statements for the period ended July 31, 2021 showed cash sales closing at 64,9%, against 35,1% in credit sales.

However, Truworths’ book grew 152,8% during the period, with 84,8% of clients in good standing, possibly due to aggressive collection or careful selection.

But the business was further hurt by COVID-19-induced lockdowns in January and February 2021, which saw government classifying clothing retailers as non-essential services and ordering them to shut down.

But unlike their counterparts in advanced economies, Zimbabwe’s non-essential firms endured the prolonged drought without State-backed bailouts to help them meet surging costs as hyperinflation mounted amid foreign currency shortages.

Big clothing chains traditionally drive their sales by extending credit sales to customers, but as economic turbulences continue to unsettle the domestic market, they have been forced to review their strategies in order to manage defaults.

Exchange rate volatilities along with previous changes and shifts to trading currencies have also forced companies to tresd carefully.

Truworths chief executive officer Bekithemba Ndebele on Tuesday said with depressed incomes, the Zimbabwean market wasn’t ripe for credit.

“The business remains focused on growing profitability sustainably,” he said in a commentary to the firm’s financial statements.

“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.

Zimbabwe has been battling to stem a deepening economic crisis that has recently been highlighted by a price rage and higher inflation, triggering the erosion of consumer spending.

Along with traders, banks have also made serious reviews to their lending strategies, saying the volatilities could work against them.

The Truworths boss spoke as the giant saw inflation-adjusted revenues slow to $286,9 million during the review period, from $341,6 million during the comparable period in 2020.

Truworths suffered a $45,3 million inflation-adjusted loss during the period, from a $18,3 million profit previously.

Ndebele said total assets tumbled to $310,8 million during the review period, from $324,6 million previously.

“The second half of the reporting period was affected by the closure of the business for two months in January and February due to COVID-19 lockdowns. The business was classified as non-essential, hence the closure,” he said.

As a result of the lockdown in January and February, the factory did not receive the specialised winter fabrics for garment manufacture.

Consequently, the retail chain relied on purchasing the limited and non-exclusive ranges from local manufacturers.