Truworths dragged down by UK business


Truworths dragged down by UK business


Published Date: 2021-07-21 | Source: INCE|Community | Author: The Finance Ghost

Truworths dragged down by UK business

Overall, Truworths managed to grow sales by 0.5% for the 52 week period to 27 June 2021. Credit sales comprised 52% of the total, slighted higher than in the comparable period. This may be a flat sales result overall, but there are significant swings in the underlying operations.

The group has not provided an update on earnings at this stage as there are "material entries" being finalised. That's not a good sign.

In case you think the grass is always greener on the other side, the Truworths announcement is a reminder that the UK has been through a tough patch as well. They don't even have decent weather to make them feel better about it.

The group's stores based in the UK were not allowed to open between 5 November and 2 December 2020 and again between 5 January and 12 April 2021. Online trading was allowed, which helped as Truworths' Office segment has a strong e-commerce presence.

Despite the vaccine programme gaining momentum in the UK, retail footfall is still being negatively impacted by low tourism and generally reduced mobility of people who now enjoy work-from-home arrangements.

UK sales in local currency plummeted by 17.2%. In rand terms, that's a 12.9% drop. Online sales contributed 63% of sales in the period, due to the extensive lockdowns. In the comparable period, online sales were 44% of the total.

The group decreased its trading space in the UK by a substantial 22%, which demonstrates the shift in bricks and mortar vs. online retailing. The impact of Covid on certain industries will be felt forever.

The Africa segment, which is mainly in South Africa, achieved growth of 5.5% in sales.This segment contributes R13bn of the R17bn in group sales, or over 76% of the total. Credit sales locally are a much higher proportion of the total than in the UK, contributing 68% of segment sales.

Trading space decreased 1.1% in the period. Woolworths also reported an overall decrease in trading space in its latest update. None of this is good news for property funds.

Civil unrest update

As if the results to end June aren't tough enough, the group had to contend with the riots last week that fall outside of this reporting period.

Out of 758 South African stores, 57 were impacted severely. This represents 7% of local sales. A further 160 stores were temporarily closed as a precautionary measure.

The distribution centres are located in the Western Cape and were unaffected. However, the unrest has caused supply chain disruptions particularly in KwaZulu-Natal, which is negatively impacting the stores that are still trading.

Some suppliers have also suffered losses but are expected to be fully back to operations this week. Most local suppliers are in the Western Cape which has proven to be a useful strategy in the past week.


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