Shares in Truworths shot up nearly 9 percent after the retailer said it had lifted its retail sales in the 53-week period ended July 3 by 9 percent to R18.5 billion despite challenges in both of its main markets, South Africa and the UK, amid continued supply chain disruption and higher inflation-related costs.
“Notwithstanding these significant macro-economic headwinds, through our continued focus on our business philosophy the group has successfully navigated these challenges, backed by a strong balance sheet and our ability to manage margins and costs effectively,” Truworths said.
The share was at R52.33 in midday trade, 23.84 percent lower in the past three years amid Covid-19 challenges.
Account sales comprised 52 percent of group retail sales for the current period, unchanged from the prior period, with account sales increasing by 8.7 percent and cash sales increasing by 9.3 percent, relative to the prior period.
“Although waves of the Covid-19 pandemic were less severe than those experienced in the the prior period, the pandemic caused wide-scale global supply chain disruption in the form of port congestion, container shortages and significantly increased freight costs,” the retailer said in a business update, adding that its audited results for the 53-week period ended July 3 were scheduled for release on or about September 1.
Truworths, which is a the clothing, homeware and jewellery retailer, said it was in the process of finalising various material accounting entries and the results for the current period were subject to external audit review. It would provide an update on earnings for the current period when it had reasonable certainty in this regard.
Truworths said the global economy continued to be hit hard by the invasion of Ukraine by Russia in February, resulting in further supply chain disruption, higher energy prices, pressure on food resources and significantly increased inflation in many countries around the world.
In South Africa, the further relaxation of Covid-19 restrictions during the current period contributed to a normalising economy, which was favourable for consumer sentiment, and ultimately retail spending. Trading was, however, negatively impacted by the civil unrest in July 2021, mainly in KwaZulu-Natal and Gauteng, as well as the recent unprecedented flooding in KwaZulu-Natal.
Furthermore, electricity supply issues in South Africa continued throughout much of the current period, also affecting many of the group’s stores where back-up power was not available.
In the UK, trading conditions were much improved in the current period with no Covid-19 restrictions affecting the group’s stores (compared to 18 weeks of store closures in the prior period), workers returning to the office and a rebound in tourism.
However, the consequences of the exit of the UK from the EU and the ongoing Ukrainian conflict had impacted trading and sentiment in general. In particular, the unusually high inflationary environment was putting strain on consumers’ disposable income, Truworths said.
Retail sales for the Truworths Africa segment increased by 7.5 percent to R14bn, with account and cash sales increasing by 8.7 percent and 4.9 percent, respectively.
Account sales comprised 69 percent of retail sales from 68 percent for the current period. Truworths Africa’s like-for-like store retail sales increased by 7.3 percent and trading space decreased by 0.2 percent relative to the prior period-end. Product deflation averaged 0.6 percent for the current period from 1.4 percent product inflation the prior year.
Gross trade receivables - relating to the Truworths, Identity and YDE businesses - increased by 9.4 percent to R5.9bn and the number of active accounts increased by 2 percent to approximately 2.6 million relative to the prior period-end.
The debtors book was in a “healthy position” as reflected in the active account holders able to purchase at 82 percent and overdue balances as a percentage of gross trade receivables improving to 14 percent from 15 percent the prior year.
Retail sales for the group’s UK-based Office segment increased in Sterling terms by 16.6 percent to £224.3 million (R4.5bn) relative to the prior period’s £192.4m, as a consequence of improved trading conditions. In rand terms, retail sales for Office increased by 14 percent to R4.5bn.
Office continued to benefit from its strong online presence, with online sales contributing approximately 45 percent form 63 percent the prior year of retail sales for the current period during which stores remained fully open, unlike the prior period when store closures boosted the contribution from online sales.
While the Office segment planned to reduce trading space by approximately 12 percent in the current period as part of the group’s continued strategy of exiting marginal and loss-making stores, favourable negotiations with landlords and the stronger than expected post-pandemic recovery in store performance resulted in trading space decreasing by only 4.4 percent relative to the prior period.
BUSINESS REPORT