Truworths reels from erosion of disposable income

BUSINESS REPORTER

Listed clothing retailer Truworths Limited has been hit hard by shrinking disposable income caused by high annual inflation rate as well as rising unemployment rate which has seen consumers turning to cheap second hand clothes.

“High unemployment levels and low disposable incomes due to inflation hurt volumes sold, with customers resorting to buying products in the unregulated informal market at prices which the business could not compete against,” Truworths said.

The concern by Truworths comes as consumers continue to shun retailers including Truworths. It is understood that more than 90% of clothes bought are second hand clothes despite the government prohibiting the importation of such.

Apparently, all major cities and towns are flooded with second hand clothes indicating that corruption is rampant at the country’s porous borders.

At the industry level, the manufacturing sector is pushing for local spinners and weavers to be given more lint to ramp up production amid indications the exportation of more lint is killing the textile industry resulting in the market flooding with smuggled second-hand clothing.

In the financial year ended July 10, 2022, Truworths narrowed its loss to ZWL$37.1m $132.3m in the previous year.

Truworths’ debtors book grew by 207.1% in the reviewed period and 90% of the customers were in good standing and able to purchase compared to 84.8% in the prior year, the company said.

The allowance for credit losses as a percentage of gross debtors was 13.2% compared to 6.7% in the prior year.

The directors deemed it prudent not to declare a dividend.

In the outlook, the company said the environment remains uncertain, in particular the sustainability of the regulated rate of 200% and tight ZWL$ liquidity.

The business suspended ZWL$ credit sales from July 1, 2022 due to the high-interest rates.

The US$ credit is considered on a selective basis where there is assurance that the US$ earnings are guaranteed.