Credit Conditions
On Thursday (August 27, 2015), leading South African clothing chain, Truworths International asserted that it believes credit conditions have improved, as it enjoyed considerable in-store credit sales growth in the second half of the year ended June. Since January, the retailer experienced an increase in credit sales, which is none too surprising, considering 70% of Truworths merchandise is bought on its store cards. Overall, the retailer’s full-year sales grew by 8.2%, yielding R11.6 billion.
Renewed Confidence
Although the clothing chain yields most of its revenue from its South African stores, it also has productive outlets in Botswana, Ghana and Nigeria.
Just six months ago, Truworths decreased its doubtful debt provision down to 12.5% from 13%, reflecting its renewed confidence in consumer payment behaviour and credit conditions.
An Exemplary Business Model
Other retailers could benefit from observing the group’s robust, adaptive business model, which saw Truworths through the credit crunch and contracted credit conditions.
Sales remained unaffected, despite interest rate hikes, which snowballed to a 1% repo rate increase overall, since mid-2014.
Truworths has already provided for those customers who could not afford to pay off their store card debt and, going forward, will be more prudent and grant higher quality credit to its customers.