CLOTHING retailer Truworths has incurred a ZW$37 136 777 loss in the financial year ended 10 July 2022, and has attributed this performance to the challenging operating environment in Zimbabwe.
PRISCA TSHUMA
In a statement accompanying the company’s financials, chairperson Mordecai Mahlangu said the operating environment, characterised by high inflation, weakened sales.
“High unemployment levels and low disposable incomes due to inflation had a negative impact on volumes sold, with customers resorting to buying product in the unregulated informal market at prices which the business could not compete against,” he said.
The company’s cash sales declined from 68% recorded last year to 66% in 2022, while credit sales went up to 34% in 2022 from 32% in the prior year.
“Sales and profitability were adversely affected by the restrictive pricing laws which rendered products expensive in US Dollar terms and relatively cheap in Zimbabwe Dollar terms,” Mahlangu added.
He said the loss was exacerbated further by the widening gap between the official exchange rate and the market exchange rate. Meanwhile, trading volumes grew by 9.5% in 2022, the credit management book grew by 207.1% with 90% of the customers in good standing, and able to purchase compared to 84.8% in the prior year.
However, bad debt expenses for the year grew due to an increase in the allowance for credit losses. The allowance for credit losses as a percentage of gross debtors stood at 13.2% compared to 6.7% in the prior year.
Truworths suspended Zimbabwe dollar credit sales in July 2022 due to high interest rates and tight Zimdollar liquidity. The company said US dollar credit would be considered on a selective basis where there is assurance that the US dollar earnings are guaranteed.
The company also forecasts that this move would result in the reduction of its volumes.
“With the suspension of ZWL credit and limited USD credit, volumes will inevitably come down and there will have to be focus on productive cost rationalisation and working capital management,” said Mahlangu.
