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British high street woes weigh on Truworths as retailer slumps

Truworths joins the ranks of retailers feeling the pain from the UK’s ailing shopping streets.

Truworths International fell the most in five months in Johannesburg as the South African retailer joined the ranks of those feeling the pain from the UK s ailing shopping streets.

Truworths said Tuesday British footwear subsidiary Office had started debt restructuring talks with its lenders in the face of the “depressed retail trading environment.” The stock slumped as much as 6.5%, the biggest drop since January, making it the second-worst performer among Johannesburg’s general retailers this year.

Read: Truworths in talks to restructure debt at British shoe chain Office

“Investors are skeptical about anything that concerns exposure to the UK and issues to do with gearing, and are not in the mood to entertain that talk,” said Peter Takaendesa, a money manager at Mergence Investment Managers.

Office, which Truworths acquired in 2015, has about 45 million pounds ($56 million) of debt, with “a significant” portion due to be settled through a lump sum payment in December 2020, the Cape Town-based company said in a statement. UK retail sales dropped the most since at least 1995 in May, industry figures show, with clothing and footwear among the worst-hit areas.

“If the UK retail sales figures for May are anything to go by, which showed contractions across every major sub-category, it looks like investors are nervous about the retailer’s ability to service the debt,” Unum Capital trader Rob Pietropaolo said in response to emailed questions.

Conditions at home are hardly better. South African retail stocks have been dragged lower this year as a weak economy constrains disposable incomes and damps consumer demand. The sector has dropped 14%, compared with the 10% advance in the benchmark index.

“Retailers are more likely to struggle in the foreseeable future as consumers become ever more cash strapped,” Pietropaolo said. “I expect the sector in general to remain under pressure.”

© 2019 Bloomberg L.P.
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What is very interesting is that the likes of WW, Truworths, TFG are NOT in the discount sector. Theses retailers are in a market which has declining consumer numbers – appro. 6 million people of the population.

Where as the discount retailers are in the lower LSM sector of the market with a population of approx. 48 million people and growing.

Good luck WW, Truworths, TFG …..

Consider though that Woolies and Truworths are in the same negative double digit territory as Mr Price and Pepkor, while Foschini is at the top of the table.

End of comments.

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