Truworths back in the black

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TRUWORTHS recorded a profit after tax of $806 916 in the year to July 8 2018, recovering from a $1,7 million loss incurred in same period prior year, buoyed by improved product supply and sales.
The designer wear retailer operates three outlets in Zimbabwe — Truworths, Topics and mass market-focused Number 1 Stores.
“Due to the change in the sales mix and increased sales at full margins (no markdowns), gross profit margins improved to 50,9 percent compared to 40,2 percent in the prior period,” the company said in its financials for the period under review.
Group merchandise sales were $13,4 million, from $12,2 million.
During the period under review, the retailer reduced its credit offering for high price points and low margin home and living product range.
“The number of accounts increased by 3,1 percent over the prior period to 91 745. The allowance for doubtful debts as a percentage of gross trade receivables remained the same at 9,4 percent,” it said, adding that “in monetary terms, the doubtful debt allowance decreased by 0,4 percent”.
The business generated a cash, earnings before interest, tax, depreciation and amortisation of $2,9 million after net working capital of $326 005, interest payments of $911 228 and net capital expenditure of $70 553.
A positive generation of $1,6 million was achieved and was applied to reduce borrowings by $1,5 million.
“During the reporting period, the business did not access any foreign supplier credit terms and had to make upfront payments for all foreign purchases,” the company said.
Local supplier credit terms were reduced and in most instances, with payments upfront being made.
Going forward, the group said its biggest risk is inventory because the group relies on foreign currency, which is hard to access.
Truworths relies on imported materials as Zimbabwe does not produce polyester fabrics which it uses to make its garments.
“Shortage of foreign currency will continue to pose a challenge to product availability and will negatively affect product supply and sales,” Truworths said, adding that “resurgent inflationary pressures will negatively affect consumer disposable income and confidence”.
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