After Truworths’ South African sales stagnated for the six-month period to December, volumes for the retailer in the first seven weeks of 2024 have fallen, bringing consumer struggles across the country into sharp focus.
In the half-year period to December, retail sales for Truworths Africa, mainly comprised of its businesses in South Africa, remained unchanged at R8.4 billion.
Now, the company has reported that sales for the first seven weeks of the second half of 2024 decreased by 0.5%.
This comes as the South African credit landscape remains under pressure due to high interest rates, pressure on consumers’ disposable incomes and a weak macroeconomic environment.
The lower retail sales for the period were on account of poor economic conditions and high interest rates leading to reduced disposable income and declining consumer confidence.
Credit extension also declined as scorecards reacted to the deteriorating credit health of the South African consumer, thereby weighing negatively on credit sales, the company explained.
Persistent port congestion challenges in South Africa had resulted in lower-than-expected merchandise deliveries of finished goods in the second quarter of the current period. This “adversely” affected sales in the peak festive trading period
“The TransUnion Consumer Credit Index measures the health of credit consumers in South Africa. The index remains below the breakeven point of 50, which indicates that the credit environment continues to deteriorate,” said CEO Michael Mark on Thursday.
Despite this, online sales continued to show “good growth,” firming up by 40.7% and contributing 4.2% to Truworths Africa’s retail sales for the interim period under review.
Group trading profit for the period, excluding interest income, increased 1.5% to R2.2bn although the trading margin decreased to 18.8% from 20.1% in the prior period.
Truworths’ trading expenses firmed up by 10.1% to R4.4bn while depreciation and amortisation increased by 12.0% to R718 million due to store lease renewals and modifications. Employee costs increased by 12.9% to R1.3bn.
Despite the South African headwinds, Truworths raised headline earnings per share (Heps) and diluted Heps for the interim period by 3.6% to about R5.12 R5.05 respectively. The company has declared an interim gross cash dividend of R3.32 cents per share for the period under review.
In the outlook, Truworths says retail sales growth will be supported through intensified focus on “unlocking opportunities by elevating and differentiating our product to enhance aspirational appeal, investing in the omni-channel customer experience and driving online sales.
BUSINESS REPORT