S.African retail group Truworths bets on new growth initiatives as profit falls

South Africa’s Truworths International is betting on the launch of new clothing brands as well as entry into the budget-clothing market to support its medium-term growth after reporting a 7% decline in half-year profit on Thursday.

The fashion retailer announced in September that it was planning to launch new store concepts in South Africa, some of which are speciality stores, focus more on young, casual ranges and put everything online in order to grow profits and stay relevant in a rapidly changing apparel industry.

On Thursday it said these new initiatives in addition with the significant improvement in the quality of its debtors book will support its medium-term growth prospects. Truworths also sells clothes on credit.

The global apparel industry is reeling from a punishing 2020, when shops were forced to close to prevent the spread of COVID-19 and consumers switched formal dresses and shirts for pyjamas and sweat pants. Shoppers were also defaulting or delaying paying their credit accounts.

Truworths, which owns UK-based shoe chain Office among others, said headline earnings per share, the main profit measure in South Africa, fell to 339.3 cents in the 26 weeks to Dec. 27 from 364.9 cents in the comparable period a year earlier.

Group retail sales fell by 8.5% to 9.7 billion rand ($660.61 million), with sales at its biggest business, Truworths Africa, down 6.8%. Office, which accounts for 27% of group sales, registered a 24.6% decline in sterling terms and a 13.3% drop in rand, it said.

If there are no further hard lockdowns in the country for the remainder of its financial year, which started in July, Truworths expects sales in South Africa to increase in the second half of the financial year compared to the same period in the prior financial year, which was hammered by the lockdown.

Office’s trading space will decrease by about 22% in the 2021 financial year as Office continues to close marginal and unprofitable stores as part of its turnaround plan, it said.