Trading environment bleak: Truworths

Zimbabwe Stock Exchange-listed clothing retailer Truworths Ltd gave a dim outlook for the remaining half of FY16 ending July, warning the credit and trading environment would worsen on account of macroeconomic challenges that have triggered retrenchments and company closures.

By Taurai Mangudhla

A Truworths shop at the corner of Kwame Nkrumah Avenue and First Street in Harare
A Truworths shop at the corner of Kwame Nkrumah Avenue and First Street in Harare

The trading and credit environment is expected to deteriorate further during the remainder of 2016 as consumer incomes come under increased stress in a situation characterised by job losses, delayed pay dates and reduced earnings, the company said in its unaudited group results for the first half of 2016.

“Focus will be on the management of trade receivables so as to maximise cash flows and ensure improvement and enhancement of the quality of the book,” reads part of the directors’ statement.

In the period under review, Truworths reported a US$327 876 after tax profit, up from US$449 370 the previous period after revenues grew to US$12,2 million from US$11,5 million during the same period prior year.

The company reported a 6,6% growth in sales compared to the same period last year buoyed by a 12,6% growth in sales at Topics. Sales at the group’s Truworths shops grew by 1,9% while Number 1 stores reported a 4,3% decline.

The group also said the number of active accounts increased by 9,7% over the comparative period to 86 270, while trade receivables increased by 23% largely due to more customers opting for the 12 month credit option.

Truworths said long term borrowings of US$5 milion went up from US$4 million in 2015 and comprise debentures of US$2 million and a bank loan of US$3 million.

The company said debentures were unsecured and bear interest of 12,5% while the bank loan bears interest of 11,5% and is secured by cross company guarantees from Topics Stores and Bravette Manufacturing and a power of attorney to register cession over book debts for US$6,7 million.

Short term borrowings of US$6,5 million are secured up to US$6 million by cross company guarantees to the tune of US$6 million.

Capital expenditure for the six months ended January 2016 amounted to US$92 301 the bulk of which (US$37 700) was allocated towards appliances followed by US$31 000 for computer technology and infrastructure while the balance was used for store refurbishments.

The company’s projections come after Zimbabwe’s trade unions announced nearly 30 000 workers across various sectors have been rendered jobless as a result of a July 17 Supreme Court ruling which allowed workers to be laid off on three months’ notice without a retrenchment package. A total 4 610 companies closed down between 2011 and 2014 resulting in the loss of 55 443 jobs.

The country’s capacity utilisation fell from 36,5% in 2014 to 34,3% in 2015 while the unemployment rate sits around at 85%.