Our opinion on the current state of TRU

30 sty 2024

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 - so its credit management strategies are critical. It is in a highly competitive industry where everyone is selling clothes from Woolworths, Checkers and Pick 'n Pay to the Foschini Group, Mr. Price, Ackermans and Pep. It is an industry constantly beset by the entry of overseas brands like Cotton On and which is entirely dependent on consumer confidence and spending. Its sales are also dependent on a fine appreciation of the rapid changes in the fashion industry. All these factors make it very difficult for the company to remain profitable. Truworths has a very conservative approach and is constantly refining its business model. It has 767 stores in South Africa with 37 in the rest of Africa and 132 stores in the UK, Germany, and Ireland. The company acquired Barrie Cline ladieswear which had been supplying Truworths for 30 years. The company 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 next few months. In an update on 9th November 2023 the company said that retail sales for the first 17 weeks to 29th October 2023 were up by 10,9% and online sales grew by 41%, now comprising 4,7% of total sales. The company said, "Retail sales for the United Kingdom-based Office increased in Sterling terms by 18.9% to £91.3 million relative to the prior period's £76.8 million. In Rand terms, retail sales for Office increased by 38.8% to R2.1 billion." Business Day reported that Truworths increased sales by 8% in the six months to the end of December 2023. Technically, the share fell on COVID-19, but we suggested waiting until it broke above its downward trendline. That break came on 4th September 2020 at a price of 3195c. Since then the share has appreciated to 7579c. We consider it to be good value at current levels on a P:E of 8,68.