Kgomotso Mathe
6 November 2009
Johannesburg — CLOTHING retailer Truworths yesterday reported a 10% increase in sales in the first 18 weeks of its 2010 financial year to this month, but warned trading conditions remained tough and many consumers were still under pressure despite declining interest rates.
Truworths said in a trading update that sales reached R2,3bn, compared with the previous corresponding period.
"Comparable (same-store) retail sales increased by 2%, production inflation measured approximately 12% and trading space increased by 9% relative to the corresponding period in 2009," it said.
The warning by Truworths about tough trading conditions confirms analysts' predictions that the positive lag-on effect of recent interest rate cuts will probably only begin to be felt in the second quarter of 2010.
"Consumer spending remains under pressure despite the 5% cut in interest rates. There is a lag effect before the relief afforded by rate cuts filters through to increased consumer spending," an investment analyst from Coronation Fund Managers , Quinton Ivan, said yesterday.
Ivan said although the group grew retail sales 10% for the 18 weeks, there had been a significant slowdown.
"Retail sales grew 14% for the first 7 weeks of the 2010 financial year, which implied that retail sales growth slowed to roughly 7,5% for the last 11 weeks. Things remain tough for consumer- facing businesses," he said.
The retailer expects the situation to remain the same next month. "Conditions are expected to remain challenging for the balance of the 2010 financial year," the group said.
"Going into Christmas, retailers are cautious and are going into it not expecting fireworks," said Ivan.
Truworths said its debtors' book increased 11% to R2,6bn, but said it was in line with management's expectations.
Ivan said the growth of the debtors book was positive because after the introduction of the National Credit Act, it had become more difficult for credit retailers to add new customers.
Truworths said it would continue to focus on expense control, managing the risk of credit and consistently applying its merchandise strategies to ensure that the risk of fashion is appropriately managed.
At the end of the financial year, Truworths had 495 stores compared with 452 last year. In the period it opened 18 Truworths stores, 19 Identity stores, 10 Uzzi stores and 1 YDE store and there was a closure of 5 stores.
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