Truworths holds up under Covid-19 pressure


Truworths holds up under Covid-19 pressure

Published Date: 2021-02-19 | Source: Stephen Gunnion | Author: Stephen Gunnion

Truworths holds up under Covid-19 pressure

The retailer has reported a small decline in earnings but remains cash flush after buying back shares.

Truworths says its stores in SA and the UK continue to be affected by the Covid-19 pandemic, resulting in lower revenue and earnings for the first half of its financial year. With second waves of the virus continuing to create ripples, it says trading is likely to be hampered in the months ahead too.

While there haven't been any further hard lockdown restrictions in SA since it was allowed to reopen stores last May, the retail group said consumer spending remained subdued in the wake of the economic crisis that has resulted from the pandemic. In the UK, trading conditions for its Office chain of shoe stores have been exceptionally challenging due to the uncertainty surrounding Brexit and the closure of its stores from 5 November to 2 December. While the UK government imposed another national lockdown in January, forcing its stores to close again, it said it had benefitted from Office's strong e-commerce presence.

For the 26 weeks to 27 December, Truworths Africa's sales decreased by 6.8% to R7.3 billion, with online sales increasing by 150% to make up 2% of total retail sales. It kept prices in check over the six months. In the UK, Office's sales fell 24.6% to £114 million and were down 13.3% in rand terms at R2.4 billion. Online sales contributed 59% of Office's retail sales for the period.

Group retail sales fell 8.5% to R9.7 billion and operating profit dropped 17.5% to R1.9 billion. Earnings per share (EPS) declined by 15.1% to 309.5c and headline EPS came in 7% lower at 339.3c. It's declared an interim dividend of 232c per share, down 6.8%.

Over the period, Truworths reduced its trading space by 1.5% as it closed a net 40 stores across all brands. At the end of December, it had 896 stores, including 13 concession outlets.

It said its financial position remained strong despite its net asset value (NAV) per share decreasing by 21.2% to R16.96, mostly due to the R2 billion impairment it recognised against the Office trademarks last June. Since then, its NAV per share has increased 17%. Net cash more than doubled to R1.6 billion at the end of December even after it spent R352 million buying back its own share over the period.

Truworths said retail sales for the first six weeks of the second half of its 2021 reporting period decreased by 6.9% compared to the first six weeks of the prior corresponding period, mainly due to the subdued consumer spending environment in the wake of the second wave of infections and lockdown restrictions.

The company's shares rose 1.9% to R48.92 yesterday, taking gains this year to 33%. The results were released just before the market close.

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