By Alois Vinga
LISTED clothing retailer, Truworths Limited has cancelled credit sales due to hyperinflationary pressures Zimbabwe is going through, and protect the company from value erosion.
Presenting the half-year financial performance of the firm, the company’s chief executive, Bhekithemba Ndebele said they were forced to push to sales on a cash-in-advance basis only to minimise risky credit sales.
“Due to hyperinflationary conditions, the business curtailed the granting of credit. In the half-year, cash sales were 66.9% of total sales and credit sales were 33.1% of total sales. The doubtful debt provision was 15.2% of gross debtors compared to 12.6% in the prior periods,” he said.
The development comes after several companies selling their goods on credit ended up collecting eroded instalments due to hyperinflation.
During the period under review, clothing units sold were 23.3% down from the prior year, and this was the trend from July to December on a month-by-month basis compared to similar months last year. This was attributed to the Covid-19 lockdown effects.
“December was negatively affected by the lockdown as we lost the last week of our trading month due to the lockdown. The week we lost is traditionally very busy with our back to school and back to work ranges,” said Ndebele.
“Overall, the half-year was negatively affected by the Covid-19 business restrictions in particular the period July to September with the most negatively impacted area on trading volumes in the half-year under review being Harare CBD (central business district) which happens to have the biggest stores.”
Trading expenses increased by 22% in hyperinflation terms and increased by 539% in nominal terms.
There were price increases in main key expenditure lines such as occupancy, employment, and other operating costs while turnover in nominal terms went up by 393%.
“Product volumes and availability improved with the introduction of the Foreign Exchange Auction by the Central Bank. In addition, through improved US$ sales, we were able to import fabrics on a continuous basis though limited by disruptions in the overseas supply chain,” added Ndebele.