Echoing the caution to shareholders in announcing the 2007 results in August, the company said in a business update that while the past few years had yielded unprecedented growth, the economic environment was now considerably tougher.
“Expectations are that store retail sales growth will moderate accordingly,” the company said.
Over the 19 weeks comparable store retail sales grew by 7% and product inflation was approximately 6%. A total of 16 new stores were opened - four Identity, five Truworths, three Truworths Man, two Young Designer Emporium (YDE) and two Uzzi. The group relocated three stores, renovated and extended seven and closed a Truworths Man store over the 19 weeks.
For the rest of fiscal 2008, a further 26 stores were planned - 11 Identity, eight Truworths, a Truworths Man and six Uzzi stores. The company planned 12 store renovations and extensions, two relocations and four store closures, resulting in an expected 12% increase in overall trading space.
In the update, the company said that, as anticipated, the strategy of meaningfully growing the active account base over the last few years had led to higher levels of delinquency and net bad debt over prior periods.
“The increases in net bad debt and the doubtful debt allowance, although at the upper end of management expectations, are within acceptable parameters. These effects have been partially offset by additional interest income arising from higher interest rates and increased utilisation of interest bearing plans.”
The update also noted a slowdown in the take-up of new accounts and a downturn in credit line extension on existing accounts.
“These are attributable both to the higher prevailing interest rates, which have reduced the disposable income of consumers, and to the implementation of the National Credit Act.”
Uptake of credit within Uzzi, following a successful launch, was in line with management expectations. The group said it was likely to exercise its option to acquire the remaining 49% of the Uzzi business in the current financial period.
Interim results for the 27 weeks to 30 December 2007 are due for release around 21 February 2008. The 2008 financial period will comprise 53 trading weeks.
