Clothing retailers see no quick end to sales slump

Truworths and Woolworths last week warned that spending was likely to remain weak.

“Management does not currently anticipate any marked improvement in consumer spending over the balance of the financial year,” said Truworths, which holds a 20% share of the middle to-upper market range.

The higher-income shoppers that form retailer Woolworths' “customer heartland”, as CEO Simon Susman put it, were starting to emerge from their shells, but not much. “We don't expect a splurge on spending at all.”

Clothing retailers have battled as sales of clothing, footwear and leather goods declined in 12 of the past 24 months, official figures say. What makes a recovery worse is continued joblessness and tight credit controls.

“It's very different to what they would have expected coming out of recession,” said Chris Gilmour, a retail analyst at Absa Investments. “The difference this time around is the extent of the chronic unemployment problem is as bad as ever. Second is the very direct and potent effect of the (2007) National Credit Act.”

Truworths said pretax profit for the half-year to December rose 10% to R1,27bn. Sales rose 12% to R3,7bn. These numbers were boosted by 38 new stores opened in the 12 months to December.

Woolworths, which has a 15% share of the clothing market, said pretax profit fell 23% to R956m, lowered by the sale of the company's financial services arm to Absa bank in October 2008. Clothing and general merchandise sales rose 9.7% to R4,1bn.

Truworths, which makes 69% of its sales on credit, said its debtors' book grew 11% to R2,8bn year on year. Woolworths' debtors' book grew by 1.2%.

Separately, privately held retailer Edcon, which makes 51% of its sales on credit, on Thursday, 18 February 2010, said sales fell 6.4% in the third quarter compared with the same period a year earlier due to tighter credit restrictions, the introduction of mandatory cellphone registration, and worse sales of ladies wear and home textiles.

Source: Business Day