Truworths expects earnings to decline

Apparel retailer Truworths said on Monday it expected to post declines in earnings for its 2020 financial year and is considering various options for its UK footwear business.

The retailer said it was executing a number of initiatives including  cutting back on expenditure and preserving cash, and was also considering various possibilities for Office including restructuring options.

“An impairment of the group’s carrying value of the Office trademarks and right-of-use assets relating to store leases will be required during the 52-week financial period ending on  June 28 2020,” Truworths said.

The company said coronavirus-led lockdowns in the countries it operates, some of which are still in force, have had a material impact on Truworths’ fashion retailing business in SA as well as the group’s UK-based Office footwear business, which was already trading against a backdrop of economic uncertainty linked to Brexit.

It said it expected a drop of at least 30% or 174c in headline earnings per share for the period depending on the impact of the lockdown on trading and the performance of its debtors book, as well as the duration of the lockdown in SA and the UK. Last year's heps was 580c.

Truworths has not been allowed to trade under SA’s initial level 5 lockdown regulations. It resumed trading on May 1 under level 3 guidelines.

Truworths said it expected to record a decline or possible loss in earnings per share for its 2020 financial year to end-June as a result of the impairments, stating it was uncertain by how much it would be affected.

Then impairment value, which has not been determined yet, will have an impact on the group’s basic earnings per share but will not have cash-flow consequences, Truworths said. 

Truworths, which owns the YDE and Ginger Mary brands, bagged a loan of £32.5m last September, about R603m at the time, to help it settle its sterling denominated debt and focus on resuscitating its troubled UK shoe chain. It bought an 88.9% stake in the high street shoe chain for £256m in 2015, but uncertainty around Britain’s exit from the EU has weighed on the business.

The company said it had  been able to extend the terms of its lending facilities leaving it with enough liquidity for the medium term.

“Management is committed to the execution of various strategies aimed at managing inventory, the account portfolio and expenses prudently during this time,” it said.

Shares for the company have lost 39.1% so far in 2020, compared to rival TFG whose share have lost 54.4% and Mr Price, 33.2%, laying bare the pressures faced by mostly non-food retailers as a result of the coronavirus.

Truworths stock closed 2.73% lower on Monday to R29.92c.

thukwanan@businesslive.co.za