24 Feb 2006

Truworths International Ltd lifted headline earnings per share by 33% to 93 cents a share for the 26 weeks to December 31, which saw sales grow 23% to R2 billion.

The interim dividend was increased by 38% to 44 cents a share, with cover remaining at 2.1 times headline earnings.

In announcing another period of vibrant trading, Truworths said it had agreed to buy a stake in UZZI, a niche retailer with 24 stores in the upper end male fashion market. The agreement is subject to a due diligence investigation and approval by the competition commission.

Truworths also increased its interest in Young Designers Emporium (YDE) to 100% by buying the remaining minority shareholding. It first bought 75% of YDE in December 2003.

CEO Michael Mark said UZZI was viewed as a good strategic fit into existing operations.

He said the contribution by the growing middle class to the improvement in sales of clothing, footwear, cosmetics and jewellery was a significant feature of buoyant retail performance. 

Sales growth across the group included comparable store sales growth of 15% with product inflation of approximately 3%. Trading space increased by 6% through the opening of six Truworths and eight Identity stores.                                      

"Larger trading areas at Truworths and Identity, where the emporium and store formats have been successfully refined, boosted sales," he said.

"Truworths' women's wear sales were R1.3 billion, up 19%; Truworths Man's were R375 million, up 26%; Daniel Hechter's R218 million, up 27%; and Identity's R173 million, up 45%."

Mark said YDE improved agency sales by 13% to R86 million.

The operating margin grew to 31%, with gains in market share, sales per square metre and per full-time employee. Operating profit improved by 31% to R622 million. Expenses as a percentage of sales reduced to 28% from 30%. The gross margin was 52%. 

Mark said the account base across Truworths, Identity and YDE now amounted to approximately 1.5 million customers as growth achieved in new customer accounts and the active account base in 2005 was again seen in the first half.  Credit sales represented 74% of total retail sales. The number of accounts able to purchase was maintained at 87% for Truworths customers.

He said that although the group utilised cash on share buybacks and significant expansion of trading space, it remained in a solid cash position, with cash and cash equivalents amounting to R637 million. Attributable cash flow per share increased from 97 cents to 101 cents.

Since the inception of the buyback strategy 47 million shares had been repurchased at a cost of R480 million and at an average price of R10.17 per share. During the first half, 7.6 million shares were repurchased at an average price of R19.85 for a total of R150 million. Repurchased shares represented 9.7% of issued shares at the interim stage.

Looking ahead, Mark said sales for the first eight weeks since December 31 were comfortably ahead of budget.

With further expansion of trading space, market share gains and continued focus on fashionable merchandise, management was confident that trading in the second half would yield further positive sales growth.