Truworths: UK shoe will pinch

Michael Mark: Credit book grew but makes up less of sales.

Picture: Sunday Times

In late November, Truworths announced it had bought 88.9% of fashion footwear chain Office Retail Group for £256m. Office has 162 stores with operations in the UK, Ireland and Germany. It also has an e-commerce business which accounts for around 20% of the group’s sales.

In a trading update this week, Truworths says group retail sales for the year increased by 46.1% to R17bn. Office contributed R3.75bn of that amount in cash since its acquisition, which came into effect in December.

Credit sales comprised 53% of retail sales; a year earlier they made up 70%. CEO Michael Mark says the group has not changed credit-approval criteria but that sales have been affected by new affordability regulations and the fact that Office sales are strictly cash.

Truworths entered the market when the UK economy was predicted to grow by 2% in 2016.

Other JSE-listed companies such as Foschini and Spar also bet on Europe, which has a sizeable and mature retail market. This was in view of the fact that the SA economy and consumers have come under increasing pressure in the past few years.

However, since the decision by British voters to leave the EU, economists have forecast that the UK will probably fall into recession.

High street shops such as Office are likely to feel the pinch as consumers seek cheaper alternatives with their lower discretionary income.

Truworths says that excluding its acquired businesses — Office, Naartjie and Earthchild — like-for-like retail sales increased 7.3%.

Trading space rose 3.8% and product inflation averaged 9.5% for the period.

The group’s credit book increased by 11.7% to R5.8bn compared with the year-earlier period.