August 23, 2004

By Dirk van de Vynck

Cape Town - Truworths International, the listed clothing retailer, said its Identity brand had the potential to grow beyond the 150 to 200 stores initially envisaged.

Michael Mark, the chief executive, said last week that Identity was launched with 12 stores in 1999 and that the original plan was to measure the viability of further stores over the following two years.

At the 2004 financial year-end, Identity's store count was already 55, with 20 new stores added and one closed during the year.

The plan was to launch a further 16 stores in the 2005 financial year.

But it was not only Identity that was set for robust expansion.

The group wanted to expand its trading area by 17 000m2, or 12.6 percent, to 152 000m2.

This was way above 2004's 6.4 percent increase and average annual growth of 5.4 percent since 1998.

Answering an analyst's question on the possibility that the company could overextend itself, which could have an adverse effect were the cycle in consumer spending patterns to turn, Mark said this did pose a worry.

But he said the company had done its homework and each expansion was decided on its merits.

He said the rapid roll-out of Identity was a given, especially considering sales jumped by 53.1 percent to R173 million in 2004, with like-for-like sales growth about 16 percent.

He said much of the expansion in the company's other departments was necessitated by the opening of new shopping malls, "with us being anchor tenants in many of these".

Mark said that the company would soon introduce credit in the Identity and Young Designers Emporium stores.

Although the cost of credit was expected to have an impact on margins, Mark said this would be compensated for by the expected increase in sales volumes.

At present, 73 percent of Truworths' sales are done on credit.

Questioned on what the company intended doing with its cash pile of R450 million, Mark said: "We have looked forward and need the cash to accomplish what we want to do."

If the situation changed the board would look at the possibility of returning the cash in the form of a special dividend.

Truworths International shares were unchanged at R10.50 on the JSE Securities Exchange on Friday.

The general retailers sector gained 0.27 percent.