Amid ongoing global economic uncertainty, SA’s consumer spending is likely to remain subdued in the coming months, says retail group Truworths International in its latest interim results.
The group reported an increase in retail sales of 2.4% year on year to R12.5bn.
As the group’s e-commerce offering continued to gain traction in the African market, Truworths Africa recorded a 4.6% rise in retail sales. Online sales were up 38%, contributing 5.8% of the division’s sales.
The retailer said it expected discretionary spending in SA to remain muted in the coming months as “volatility and uncertainty in global economies remain a risk to the stability of the local economy and currency”.
In November, when it reported sales for the first 18 weeks of the financial year, Truworths said trading conditions in SA remained challenging.
The group said in its latest annual report that competition from Shein and Temu — the online value clothing retailers based in China that sell directly to consumers in SA — with increasing competition from online and traditional retailers were the biggest risks facing the business.
Lower inflation and further expected interest rate cuts were, however, expected to support consumer spending in the UK, it said.
Office UK
Office UK, the group’s retail brand which manages 86 stores across the UK and in Ireland, was central to Truworths’ improved performance during the period under review, with retail sales from this segment up 13.3% from the previous comparable period.
The UK business’ strong trading performance was attributed to its store modernisation and expansion programme, as well as its established e-commerce platform. Online sales from Office UK rose 7%, comprising 45% of the business’ total retail sales.
In the first half Truworths expanded its trading space to 898 stores. Truworths Africa opened 23 new stores and closed 15, while Office UK opened six and closed four.
The retailer expects its trading space to increase 1% by the end of the financial year, with Office UK set to grow its trading space 10%.
Headline earnings per share were down 4.6% at 489.2c, while trading profit decreased 8.3% to R2bn. This was primarily driven by R41m in foreign exchange losses for Truworths Africa, with depreciation charges and higher employment costs due to minimum wage increases and operational expansion in the UK.
Despite the slip in profit, Truworths said that the company remained highly cash generative, with R3.3bn in cash generated from operations, which was used to fund R429m in capital expenditure and R756m in dividend payouts.
The group declared an interim dividend of 317c per share, down 4.5% from the previous comparable period.
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