Truworths cautious on sales lift

Johannesburg - Truworths International [JSE:TRU], the R20.4bn retailer, lifted sales nearly 12% to R3.7bn in the half-year ended December.

Truworths CEO Michael Mark said lower interest rates and real wage increases had been positive for consumers. However, these factors have not yet resulted in a major improvement in discretionary consumer spending.

"Ongoing job losses and rising utility and fuel costs have continued to keep consumers under pressure," he said.

On the trading outlook, Mark said the environment was expected to remain challenging as the country emerges from recession.

"We are not anticipating any marked improvement in consumer spending over the balance of the financial year," he said.

Retail sales for the first seven weeks of the second half of the 2010 financial year grew by 11% on the prior period, he said.

In the period under review, sales in comparable stores grew by 3% and product inflation measured about 10%.

Truworths' flagship ladieswear brand increased turnover by 8%, while Truworths Menswear grew sales by 12%. Sales of Identity and Daniel Hechter increased by 18% and 12% respectively.

According to Mark, the group continued to gain market share. The market share of ladieswear increased by 20.6% to 21.7%, while that of menswear rose by 18.4% to 19.1%.

Trading space increased 10% over the last year as the group passed the 500-store milestone for the first time. It ended the period under review with 513 stores, following the opening of 45 stores. Seven stores were closed.

The trading margin for the period improved from 26% to 27%, with trading profit increasing 18% to R1bn.

Expense growth of 10% was mainly attributable to inflation and the increase in employment and occupancy costs relating to new store openings, Truworths said.

Mark said the group's balance sheet continued to strengthen, with net asset value per share increasing 181c to 953.1c.

The group remained in a strong cash position and increased cash and cash equivalents by R349m to R1.1bn at the end of the period.

Discussing credit management, Mark said net bad debt as a percentage of the debtors' book had improved.

The debtors' book has grown by 11% over the past year to R2.8bn. Credit sales accounted for 69% (2008: 68%) of retail sales in the six months to December 2009.

An interim cash dividend of 102 cents per share has been declared, an increase of 16%.

- Fin24.com