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TRUWORTHS reported a near flat top-line in the half year ended January 5, 2014 after a deteriorating credit environment and an increase in trade expenses, but the in-store credit card launched in October had boosted the group’s cash generation.
Chief executive Mr Themba Ndebele told analysts on Tuesday that overall consumer spending had been depressed due to high unemployment levels, inconsistent wage and salary payments and delayed salary payments in the peak period of November and December.
“The effect of this was inconsistent debt servicing, debt re-scheduling which had a negative impact on sales and a positive impact on interest receivables,” said Mr Ndebele.
He said there had been a slowdown in sales, which had resulted in more clearance sales. “And this had impacted negatively on gross margins.”
Revenue in the six month period was up 2 percent to US$14,17 million from US$13,86 million last year. Retail sales were flat at US$13,22 million. The gross margin decreased to 51,7 percent from 52,5 percent.
Mr Ndebele said there had been an improvement in the buying margin at 3,5 percent, but markdown costs which were a negative 3,3 percent weighed down the overall GPs.
Trading expenses amounted to US$5,85 million, 443 percent of turnover and a 6 percent increase from last year. Excluding trade receivable costs, Mr Ndebele said trading expenses were managed well and could have grown by 3,3 percent.
Employment costs made up the bulk of the expenses. Occupancy costs grew 8,6 percent which Mr Ndebele said could have risen 1,8 percent if non-comparable store costs are excluded.
Retail trading profit was down 31 percent to US$992 109 while the pre-tax was at US$1,32 million, a 7 percent drop from last year. The bottom line also dropped by the same margin at US$987 426 while earnings were at US0,26 cents.
The in-store credit card launched in October contributed 38,52 percent for Truworths and 32,14 percent for Topics in merchandise sales. It is being used by 4 371 customers.
The average spend was US$220 against US$176 spent by customers who are not on the scheme.
Trade and other receivables decline 15,5 percent while the scheme also resulted in positive cash flows generated by operations of US$2 million.
Credit card sales were 21,2 percent of the total in Truworths and 18, 5 percent in Topics.
Mr Ndebele said an additional 5 000 customers will be moved to the card system for another US$5 million.
Online Reporter