Our opinion on the current state of TRUWTHS(TRU)Truworths (TRU) is a clothing, footwear, and accessories retailer that operates in Southern Africa and the UK and is listed on the JSE and the Namibian Stock Exchange. It makes 70% of its sales in South Africa on credit, making its credit management strategies critical.
The company operates in a highly competitive industry where numerous retailers, including Woolworths, Checkers, Pick 'n Pay, the Foschini Group, Mr. Price, Ackermans, and Pep, offer similar products. The industry is also challenged by the entry of international brands like Cotton On and is entirely dependent on consumer confidence and spending. Additionally, its sales are influenced by rapid changes in the fashion industry, making profitability difficult.
Truworths follows a conservative approach and continuously refines its business model. It operates 767 stores in South Africa, 37 in the rest of Africa, and 132 stores in the UK, Germany, and Ireland. The company acquired Barrie Cline Ladieswear, a supplier for 30 years, and is in the process of launching a new low-cost value chain called "Primark" to compete with Mr. Price and Jet. It plans to roll out 15 to 20 new value stores in the coming months.
In its results for the 26 weeks to 29th December 2024, the company reported merchandise sales up 2,5% and retail sales up 2,4%. Headline earnings per share (HEPS) fell 4,6%, while the company's net asset value (NAV) increased by 21,9%. The company stated, "Truworths Africa’s retail sales decreased 1.1% relative to the prior period. Account sales decreased by 0.9% and comprised 70% (Dec 2023: 70%) of the segment’s retail sales for the current period. Cash sales decreased by 1.6%. Online sales continued to show good growth in the current period, increasing by 38% and contributing 5.8% to Truworths Africa’s retail sales."
The share reached a high of 11,212c on 4th November 2024 before entering a new downward trend. Our advice is to wait for the share to break up through its downward trendline before investigating further.