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Truworths SA sales performance surprises to the upside

Despite the pandemic-boosted work-from-home trend.
Not reflected in its latest results is the fact that 57 of its stores were affected directly ‘and severely’ by the recent unrest in SA and another 160 indirectly due to precautionary closures. Image: Supplied

Upmarket clothing retail giant Truworths International’s African business – made up largely of its South African operations – reported sales growth of 5.5% to R13 billion for the 52-week period ended June 27 2021 in a business update on Tuesday.

It came as something of a surprise, especially considering the ongoing impact of the Covid-19 pandemic on the smart casual clothing retail trade as the work-from-home trend continues.

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This trend dented competitor The Foschini Group’s (TFG) sales both locally and within its TFG London unit. Based on sales growth locally, Truworths seems to be performing better.

Read: Pandemic pummels TFG to R719m FY operating loss

However, its UK business, dubbed Office, continues to underperform and is taking strain from tougher trading conditions due to stricter Covid-19 restrictions to trade in that country. TFG’s UK business has also been significantly affected.

Sales and trading space

“Truworths Africa’s like-for-like store retail sales increased by 4.3% and trading space decreased by 1.1% relative to the prior period-end. Product inflation averaged 1.4% for the current period [2020: 1.2% product deflation],” the group noted.

“Retail sales for the group’s UK-based Office segment decreased in [pound] sterling terms by 17.2% to £192.8 million relative to the prior period’s £232.8 million, as a consequence of the prolonged store closures. In rand terms, retail sales for Office decreased by 12.9% to R4 billion,” Truworths said.

The group pointed out that trading space for the Office segment decreased by 22% relative to the prior period, as it “continued its strategy of exiting marginal and loss-making stores”.

The double-digit decline in retail sales in its UK business took a toll on the group’s overall sales performance, but it still managed to stay in positive sales territory.

“Retail sales of the group for the current period increased by 0.5% to R17 billion relative to the R16.9 billion reported for the 52-week period ended 28 June 2020,” it said.

“Account sales comprised 52% [2020: 51%] of group retail sales for the current period, with account sales increasing by 2.8% and cash sales decreasing by 1.9%, relative to the prior period.”

However, account sales within its main Truworths Africa business increased by 2.8% while cash sales shot up 11.8%. Account sales in the Africa unit comprised 68% of retail sales, compared to 70% in 2020.

Pandemic impact

“Over the last 18 months the Covid-19 pandemic has severely disrupted retail businesses across the globe. Truworths International continued to be materially affected by the impact of the pandemic in its main markets in South Africa and the UK during its 52-week financial period ended 27 June 2021,” it said.

“While there were no hard lockdowns in South Africa during the current period [2021 financial year] various levels of lockdown restrictions adversely impacted economic growth, employment, consumer confidence and spending, as well as retail foot traffic as the country experienced severe second and third waves of infection,” the group added.

“In the UK, trading conditions were exceptionally challenging amidst the Brexit transition and the closure of the group’s stores from 5 November 2020 to 2 December 2020, and then again from 5 January 2021 to 12 April 2021, as all non-essential retail activity was suspended by the government in an attempt to curb the spread of the virus.”

Online trading

The group said that online trading activity, however, continued throughout these closures, and benefitted from the UK-based Office segment’s strong e-commerce presence, as previously reported. Most retailers are reporting more significant growth in online sales in the wake of the pandemic.

Read: TFG’s online galaxy grows

“Lockdown restrictions in the UK have been gradually relaxed in the last quarter [April to June 2021] as the government’s vaccine programme gained momentum, however retail footfall continued to be impacted by low levels of tourism and work-from-home arrangements,” it added.

Truworths said that while the uncertainty around Covid-19 “is expected to continue for many months ahead” especially in the context of new variants of the virus and uncertainty around vaccine efficacy, the group’s strong balance sheet and ability to manage margins and costs effectively positions it to succeed amid these challenging times.

Impact of SA unrest

Meanwhile, updating the market on the impact of the recent unrest and looting in KwaZulu-Natal and Gauteng on its business, the group said a number of its stores have been targeted, leaving Truworths with stock losses and damage to properties and equipment.

“In these incidents 57 of the group’s South African store portfolio of 758 stores have been impacted directly and severely by looting and destruction of property.”

“More than 55% of the 57 stores are located in central business districts and small shopping malls and approximately 45% are located in regional centres. These stores would normally account for approximately 7% of the retail sales in the group’s South African store portfolio,” it added.

Truworths said none of its stores in super-regional malls (over 100 000 square metres in size) have been impacted.

Read: SA unrest: Ramaphosa’s message to organised business

“Furthermore, approximately 160 stores have been impacted indirectly as a consequence of precautionary closures. At present it is too early to determine the full extent of damages suffered and when the stores that have been closed pre-emptively will resume trading,” it noted.

The impact of the looting and damage to its stores will only be reflected in the group’s 2022 financial results.

Its audited results for the 52-week period ended June 27 are set to be released on or about September 2.

The group’s share price was up almost 2% on Tuesday, closing at R58.75 a share.

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nothing to shout about as salary and rent increases are in excess of their much touted 5.5 % sales growth. Who are they kidding…the company is way over valued!!

End of comments.

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