The apparel retailer said on Friday it expected to report a 46.1% increase in sales for the year in August, to R17bn, with cash sales up 130% compared with the previous period. Credit sales rose a paltry 11%.
UK retailer Office, which Truworths acquired for £256m in December, brought in R3.75bn in sales. Children’s apparel retailers Naartjie and Earthchild, bought earlier in 2016, also provided a boost. Without these acquisitions, cash sales rose 15.4%, with credit sales up 9.7%. This compares with a 7.7% increase in the firm’s credit sales last year, while cash sales rose just 9.4%.
But Truworths CEO Michael Mark said on Friday the group did not change its credit granting criteria in the face of higher interest rates. Credit sales growth had been affected by the new affordability regulations and the fact that customers did not always have their documentation to activate accounts.
Chris Gilmour, an analyst at Barclays Wealth and Investment Management, said a number of factors had made credit spending less attractive. "Although interest rates are historically low, and thus repaying credit is that much easier, rejection rates for new credit applications are much higher than they used to be. In other words, credit is much more difficult to access."
New legislation made it possible for defaulters to have their records wiped clean, putting pressure on credit providers to raise the quality of their books.
"It means retailers need to be much more adept at offering good assortments of merchandise in their stores, and not just rely on financial service income to the extent that they did in the past," Gilmour said. Credit sales comprised the bulk of Truworths’s retail sales at 70%, in line with the retailer’s historical credit-cash ratio of 70:30.
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