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Challenging holiday environment for Truworths

Johannesburg - Truworths [JSE:TRU] said in a Sens trading update on Monday that it experienced a challenging environment during the 26-week period ended 25 December 2016.

According to Truworths, factors contributing to the tough environment included low economic growth, high product inflation resulting from rand weakness, reduced foreign revenues when translated into rand arising from sterling weakness and the negative impact of the credit affordability assessment regulations in South Africa.

"This impact is reflected in the marked decrease in active accounts and credit sales relating to those customers that have been less than 12 months on the group's debtors book. The high SA revenue base established in the corresponding prior 26-week period ended 27 December 2015, increased pressure on consumers from rising inflation, especially in food prices, and a weak employment market characterised by job losses and soft real growth in incomes have also impacted the group's performance," Truworths said.

Group retail sales for the period increased by 21% to R10.2bn relative to the prior period, while cash sales grew by 53%. Credit sales remained unchanged. Credit sales comprised 50% (2015: 60%) of group retail sales for the period - inclusive of the non-comparable retail sales of the group's UK business, Office, which was acquired with effect from 4 December 2015. The group said the reason for the change in the credit cash sales metric is that Office generates cash sales only.

Excluding the contribution from Office, retail sales at R7.4bn as well as cash and credit sales for the period remained unchanged relative to the prior period.

"It is to be noted that the prior period retail sales growth was 15%, excluding the contributions from the Office, Earthchild and Naartjie acquisitions," the group said.

Credit sales comprised 69% (2015: 69%) of these retail sales for the period. Like-for-like store retail sales, which exclude those attributable to Office, decreased by 3% for the period, while product inflation averaged 15.5%. Office recorded retail sales for the period of £159m (R2.9bn) relative to the prior period's £160m.

The debtors’ book increased to R6.4bn and was 5% higher than at the prior period-end. The percentage of active account holders able to purchase at the end of the period was at 85% compared to 86% at the prior period-end and 82% at June 2016.

"Against this background the group's diluted headline earnings per share (diluted heps) for the period are expected to decrease between 2% and 6%, to between 380.6 cents and 397.9c per share, relative to the prior period diluted heps of 403.8c per share.

Relative to the prior period adjusted diluted heps of 432.5c per share (calculated by excluding the Office acquisition transaction costs), the group's diluted heps for the period are expected to decrease between 8% and 12% to between 380.6c and 397.9c per share.

"Shareholders are advised that this trading update does not constitute an earnings forecast and that the financial information provided herein has neither been reviewed nor reported on by the group's external auditors. The group's interim results for the period are scheduled for release on or about Thursday, 16 February 2017," the group said.

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