41 of 2016

Newsletter No.41      11 November 2016

Truworths update hits shares

Investors discarded Truworths stock on Thursday, sending the share price down more than 8% in intraday trade, after the clothing retailer released a business update that drove home the severity of the constraint on consumer spending.

Picture: Sunday Times

Truworths, led by Michael Mark, said sales in its first 18 trading weeks declined by 1% to R4.4bn compared with the year earlier. This excluded its acquisition of UK shoe chain Office. Including Office, sales increased by 39% to R6.2bn.

Truworths’ share price closed 5.54% lower at R66.97.

Barclays Africa Group investment analyst Chris Gilmour said the update was well below expectation.

“I haven’t been that bullish on Truworths. Discretionary spending has come under immense pressure. Food inflation has a lot to do with that. The more you have to spend on food, the less you have to spend elsewhere,” said Gilmour.

Gilmour described the update as incredibly poor. He said while Truworths was a quality and not expensive company, the economic challenges in SA and the UK were unlikely to improve anytime soon.

“I find it difficult to get enthusiastic about the company other than in the longer term. Almost without exception, apparel retailers — other than Foschini — have been struggling. They find themselves navigating in an extremely tight position.

“If you believe the drought will abate then you could argue that there could be more money for consumers to spend. But I find it unlikely,” said Gilmour.

A series of forecasts predict rising inflation to contribute to a sharp slowdown in the UK economy in 2017. The rise in inflation, the forecasts say, will put a squeeze on household spending. At home, Statistics SA data showed that retail sales in August grew at 0.2%, the slowest pace since June 2014.

Local economists expect the stagnation in retail sales to persist into the new year.

Sasfin Wealth senior equity analyst Alec Abraham said he expected retailers in general to release unimpressive data in terms of sales volumes.

“We’ve been saying for quite some time that consumers are under strain but it appears as though that strain is intensifying. People are spending on what they need to and cutting from everything else”.

Abraham said apparel retailer Edcon, for example, had reported a slowdown in full-year sales volumes. The slow down had accelerated significantly in the company’s first-quarter update.

“The declines in sales volumes for retailers are likely to pick up with inflation. People don’t have money. I was expecting a bad number from Truworths but, to be brutally honest, I didn’t expect it to be that bad. The decline they reported is really ugly,” said Abraham.

Truworths brands include Truworths, Truworths Man, Daniel Hechter, Inwear, Identity and LTD.

Combined with Office, the retailer showed strong progress in moving from credit to cash sales. Its overall credit sales fell to 49% from 69% while cash sales jumped 130%.

But excluding its UK acquisition, credit sales remained at about 70%, causing the group’s trade receivables book to increase by 6% to R5.7bn. Production inflation in the period averaged 16%, higher than rivals Woolworths and TFG.
Source Business Day

Woolworths grants school scholarships

Woolworths is marking its 85th anniversary by providing 50 educational bursaries to deserving students totalling R1 million. The retailer has partnered ‘MySchool MyVillage MyPlanet’ for the fundraising programme, available to all Woolworths’ customers.

Woolworths opened its first store in 1931 and a key element of Woolworths’ journey has been a commitment to making a difference in South Africa through a range of community programmes and, in particular, schools and education.

The retailer has partnered with MySchool MyVillage MyPlanet, South Africa’s number one community support fundraising programme, since 1999 and over that time has given back nearly R400 million to assist a range of charities, animal and environmental organisations and schools.

Woolworths also manages ‘Making the Difference Education’ programme, which is now present in over 2,800 primary schools across the country with a focus on the environment and healthy living.

New textile factory to come up in Ghana with Chinese help

A new textile factory will be set up in Ghana’s Savannah Accelerated Development Authority (SADA) zone at a cost of $300 million. SADA and the China National Textile and Apparel Council (CNTAC) have signed a MoU in this regard. For cultivation and processing of cotton, the main raw material for the factory, CNTAC had already purchased 5,000 acres of land.

The MoU was signed by ambasador Kwesi Quartey, secretary to the Ghana president and CNTAC vice-president Xu Yingxin, Ghanaian media reported.

Yingxin said that the agreement would not only be beneficial to both parties, but would also lead to the strengthening of relationship between the two countries.

Ghana government had established SADA to develop Savannah Ecological Zone. SADA was one of the flagship initiatives of the Ghana government aimed at fast-tracking the development of the northern, upper east and upper west regions of the Savannah Ecological Zone and the northern parts of the Brong Ahafo and Volta regions, said Quartey.

He added that SADA is an initiative to facilitate the development of the Savannah Ecological Zone which is deprived to bridge the development gap between the area and the southern sector of the country.



Buyers from chain stores, independent retailers, mini chains, boutiques, wholesalers, agents as well as factory/production managers and other important industry decision makers were able to view and compare a vast range of products and services from around the world including South Africa, India, Pakistan, China, Taiwan, Bangladesh, Hong Kong, Portugal, Brazil, Indonesia and Turkey.

The products on display included womenswear, menswear, childrenswear, leather garments, footwear, fashion accessories, home textiles and made-ups, clothing fabrics, yarn, thread, machinery, trims and much more.

Did you know…..

A man designed GPS-programmable shoes that are activated by clicking your heels together three times.

Michael Jordan’s dad, James Jordan, was murdered by a guy wearing a Michael Jordan T-shirt.

After a student was suspended for wearing one of their tees, the band Korn gave away hundreds of their shirts to a Michigan high school. Police actually helped hand out the tees.

To Advertise………………….. Click here to see fact sheet.

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