A higher cost of living is pushing Truworths’s South African customers to rely on their store accounts to supplement their diminishing buying power.
In an update to investors on Thursday, the fashion, homeware and general merchandise retailer reported that for the first 26 weeks of its 2023 financial period, account sales constituted 52% of group retail sales.
This, according to Truworths, represented a 16.5% increase in the use of credit on the prior period, with cash sales only increasing by 10.8%.
The reliance on credit purchases boosted Truworths Africa’s retail sales which grew by 13.8% to R8.4 billion on the prior period. Stores in the Truworths group include, Truworths Man, Loads of Living, Naartjie and YDE.
“Strong demand for merchandise purchases on account has resulted in Truworths Africa’s gross trade receivables increasing by 19.3% to R7.1 billion (Dec-2021: R5.9 billion),” the group said.
Further painting the picture of how much pressure the consumer is under, Truworths says it has seen the number of active accounts increasing by 5.7% during the period to 2.8 million, this despite the group’s strict credit-granting criteria.
“Active account holders able to purchase and overdue balances as a percentage of gross trade receivables were at 84% (Dec-2021: 85%) and 11% (Dec-2021: 10%), respectively.”
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The JSE-listed retailer maintained double-digit group retail sales growth despite facing tough inflationary pressures in both South Africa and the United Kingdom (UK) as well as heightened load shedding locally. Group retail sales for the period increased by 13.7% to R11.3 billion.
With regard to the impact of load shedding on its South African operations, the retailer has led the pack in shielding its businesses from economic darkness. According to Truworths, 77% of its Africa turnover is protected against rolling blackouts.
However, despite being able to remain largely operational during power cuts, the retailer did note that load shedding will continue to have a negative impact on retail footfall, which will in turn affect retail sales especially where malls do not have back-up generation capacity.
Despite this, the retailer has reported that it expects headline earnings per share (Heps) for its 2023 interim results to increase by up to 11% to approximately 498 cents.
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Office, the group’s UK-based business continued to perform this period, despite high inflation eating away at consumer’s disposable income. Retail sales for the business grew by 13.3% in rand terms, to R2.9 billion, boosted by increased activity in the last nine weeks of the reporting period.
Less positively, eCommerce sales contributed slightly less to overall sales this time around, dropping to 44% from 47% in the prior period as more consumer’s returned to physical stores for their shopping.
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The business has reduced its trading space by a further 3.8%, falling in line with the group’s plans to exit “marginal and loss-making stores as leases expire or lease breaks become available.”
The group plans to reduce its footprint by a further 9% during the 2023 financial period.
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