Truworths International Limited, a leading retailer in South Africa, released its business update and voluntary trading statement today, revealing a mixed performance for the 26-week period ended 31 December 2023. The company reported a notable increase in Group retail sales, but faced challenges in its Truworths Africa segment amidst economic headwinds.
Group Retail Sales Surge, but Truworths Africa Faces Headwinds
According to the report, Group retail sales for Truworths International surged by 8.2% to R12.2 billion compared to the same period last year. However, the Truworths Africa segment, mainly comprising the South African market, experienced a slight decline of 0.3% in retail sales, reaching R8.4 billion. This decrease was attributed to poor economic conditions, high interest rates, and port congestion, leading to reduced consumer spending and lower merchandise deliveries during the December period.
Shift in Sales Dynamics
A notable shift in sales dynamics was observed, with account sales remaining unchanged at 48% of Group retail sales, while cash sales increased by 17.0% relative to the prior period. Truworths Africa’s gross trade receivables increased marginally by 1.6% to R7.2 billion, with the number of active accounts growing by 4.6% to 2.9 million. However, like-for-like store retail sales for Truworths Africa decreased by 3.3%, reflecting the challenging market conditions.
Office Segment Shows Resilience
In contrast, the Group’s UK-based Office segment demonstrated resilience, with retail sales increasing by 15.6% in Sterling terms to £162 million. This growth translated to a 33.1% increase in Rand terms, reaching R3.8 billion. The Office segment benefited from its unique market positioning, strong brand partnerships, and robust online presence, with online sales contributing approximately 47% of total retail sales.
Earnings Outlook
Truworths International provided an earnings outlook for the current period, estimating earnings per share (EPS) to range from 515 to 535 cents, reflecting a 1% to 5% increase compared to the same period last year. Headline earnings per share (HEPS) are projected to range from 495 to 515 cents, indicating a 0% to 4% increase compared to the prior period.
Future Prospects and Challenges
Looking ahead, Truworths International anticipates challenges in the South African market to persist, with ongoing economic uncertainty and consumer credit constraints affecting sales growth. However, the company remains optimistic about the resilience of its diversified business portfolio and its ability to adapt to changing market conditions.
Interim Results Release
The Group’s interim results for the current period are scheduled for release on or about Thursday, 29 February 2024. Shareholders are advised that the information provided in the business update and trading statement has not been reviewed by external auditors and does not constitute an earnings forecast.
Conclusion
Truworths International’s performance during the first half of the 2024 financial period reflects the challenges and opportunities inherent in the retail industry, particularly in the face of economic volatility. With a strategic focus on innovation, customer experience, and prudent financial management, the company aims to navigate these challenges and deliver sustainable growth in the coming periods.
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