Truworths sales fall as Transnet failures bite

Truworths reported poor results for the second half of 2023, as the country’s port congestion and declined consumer spending weighed on the clothing retailer’s performance.

Truworths – which owns brands such as Office, Identity, and YDE – released its results for the 26 weeks ended 31 December 2023 today.

Retail sales for Truworths Afric, comprising mainly of the Truworths businesses in South Africa, were unchanged at R8.4 billion relative to the prior period.

However, like-for-like retail sales decreased by 3.3%, while product inflation averaged 8.4%.

Truworths noted that the current period’s sales performance should be compared against the high level of sales recorded in 2022, which reflected retail sales growth of 13.4%.

The effect of this high base was especially pronounced in the last three months of 2023. 

Truworths said its retail sales were impacted by poor economic conditions and high interest rates, leading to reduced disposable income and declining consumer confidence. 

In addition, credit extension declined as scorecards reacted to the deteriorating credit health of South African consumers, thereby weighing negatively on credit sales. 

Port congestion challenges in South Africa also 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 trading period.

However, online sales continued to show good growth in 2023, increasing by 40.7% and contributing 4.2% to Truworths Africa’s retail sales.

The retailer’s gross profit margin increased to 53.6%, up marginally from 53.5% in December 2022.

This saw trading profit, which excludes interest income, increase by 1.5% to R2.2 billion. The trading margin decreased to 18.8% from 20.1% in the prior period.

Other income decreased 18.1% compared to the prior period. 

However, excluding the reversal of previously recognised IFRS 16 impairment losses from both periods as well as the insurance claim payments received in the prior period relating to the civil unrest in South Africa during July 2021, other income increased by 1.0%.

Trading expenses for the current period increased by 10.1% to R4.4 billion compared to 2022 and constituted 37.4% of sale of merchandise.