Cash sales up at Truworths

Johannesburg - Fashion retailer Truworths says it's ringing up more cash sales, reflecting stronger sales in its cash-based Identity brand.

On Wednesday afternoon, the retailer said 68% of sales were credit-based for the six months to December 28, 2008, compared with 71% for the same period in the prior year.

Net bad debt as a percentage of Truworths' debtors' book (gross trade receivables) was 11.9%, or R271m, slightly higher than the 11.3% reported for the full year to end-June.

Truworths' account base grew by 3% to 1.8 million accounts, with active accounts now around 1 million, and 87% of account holders able to purchase at year-end.

The group rejected 59% of applications for credit. "Rejection rates have been consistent," Truworths CEO Michael Mark told Fin24.com. Unlike its peer Foschini, Truworths would not consider selling the financial services arm of its business: "See it as a facility for customer growth - we would not sell or separate it."

In a research report on Foschini, stock brokerage BJM noted that Foschini has plans to separately list its financial services joint venture with Standard Bank, RCS.

Despite two interest rate cuts totalling 150 basis points and the prospect of more over 2009, Truworths - which also operates the Young Designers Emporium and Daniel Hechter chains - does not foresee the 20% growth in sales of the first seven weeks of calendar 2009 (compared with 2008) being sustained till its year-end in June.

"While the decline in interest rates and lower fuel costs are positive for consumers, the retail trading environment remains difficult and management does not expect conditions to improve materially over the remainder of the 2009 period.

Truworths said operating profit for the first half of the year rose 11%. It reported an additional week for the six months to end-December 2007 and is therefore coming off a higher-than-usual base. If the effects of the 27th week were excluded, operating profit would have increased by 18%.

Merchandise sales rose by 10% to R3.3bn. The company's operating margin rose by a percentage point to 35%.

Headline earnings rose by 16% to 184.7c/share, while an interim dividend of 88c/share - up 22% on the prior year - was declared.

Mark attributed Truworths' performance against the backdrop of a recession in retail sales to the group's clear focus on youthful, fashionable South Africans. "It's a universal focus across all our brands - we're catering for one customer. It's simpler to stay focused on one goal."

Trading space grew by 11% relative to the same period in 2007; the group ended the interim period with 475 stores. Mark said there were plans to grow store space by 10% for the year, with the rate subsequently slowing down.

Shares in Truworths closed 3.2% lower at 3 250c.

The writer holds shares in Truworths.

- Fin24.com