Major South African retailer feels the pain

Truworths came under immense pressure in its 2025 financial year, which the retailer attributes to South Africa’s dampened consumer environment.

Truworths is a major South African clothing retailer that owns well-known brands such as Daniel Hechter, Ginger Mary, Earthaddict, Uzzi, LTD Kids and Naartjie.

The company operated through two divisions – Truworths Africa, its African operations, and Office UK, which houses its UK operations.

The retailer released a trading update for the 52-week period ended 29 June 2025 on Wednesday, 13 August 2025, after market close.

This update showed that Truworths’ earnings came under severe pressure in its 2025 financial year, with the company citing South Africa’s tough macroeconomic environment.

The retailer explained that there was cautious optimism in mid-2024 following the formation of the Government of National Unity and, later in the year, the implementation of the two-pot system.

However, it said this optimism did not materialise and, despite lower inflation and interest rates, South Africa’s macroeconomic environment remained constrained.

The company said this environment was characterised by low economic growth, stagnant real wage increases, elevated unemployment, and rising living costs, all of which continued to erode consumer disposable income.

This saw Truworths Africa’s gross profit margin come under pressure, and the division recorded a 0.4% decrease in retail sales for the 52-week period. This division recorded internal inflation of 1.2%.

The retailer explained that this business’s performance was also impacted by late deliveries of winter merchandise in the prior period due to port congestion and global shipping disruptions.

This, combined with the delayed onset of winter in 2024, dampened seasonal demand. As a result, the retailer had to increase markdowns on its products in the first half of the period to meet terminal stock objectives. 

In addition, it said continued weak trading conditions necessitated an increase in promotional activity to manage inventory levels effectively.

Truworths’ Office UK division fared better, delivering a strong trading performance and consistently outperforming the broader market.

This division recorded a 9.4% increase in retail sales for the period, which offset Truworths Africa’s weaker performance.

However, since Truworths Africa constitutes a far larger share of the group’s sales, Truworths’ overall retail sales grew by a modest 2.7% year over year.

Truworths expects its earnings per share for the 2025 financial year to decrease by between 32% and 28%, while headline earnings are projected to decline by between 11% and 7%.

The retailer attributed this, in part, to the higher comparative base in the 2024 financial year, as this period benefited from once-off incomes.

These incomes included trademark and right-of-use asset impairment reversals, the impact of the first-time consolidation of the group’s charitable trusts and insurance recoveries, with a combined value of R993 million, net of tax.