Fashion retailer Truworths says it is battling credit risks and tough competition from global online fashion giants.
The group, which generates 70% of sales in SA, recently reported a 0.4% decline in local retail sales in the year to end-June with gross margin falling to 53.6% below its five-year average of 54.9%.
In its latest annual report published on Tuesday the company said a combination of delayed winter deliveries, weaker consumer demand and aggressive discounting affected profitability.
Global value retailers have also expanded their reach in the country. Truworths said these fast-fashion retailers selling directly online to local shoppers are reshaping the market, capturing price-sensitive consumers and forcing established players into more frequent promotions.
The trend is most evident in casualwear and particularly in women’s apparel, an important category for the group.
Margin pressure as competition intensifies
Truworths said this wave of competition threatened the sustainability of margins. Local rivals, online and in traditional formats, were also fighting harder for market share, further crowding an already constrained consumer market.
In his letter to shareholders CEO Michael Mark said the group’s online and e-commerce business continued to gain traction in the year under review, with group online sales rising to 20% of total retail sales, up from 18% the previous year and just 9% six years ago.
Truworths Africa’s online sales surged 33.7%, contributing 6.5% of retail sales compared with 4.9% in 2024, while Office UK’s online sales grew 6.5% and now account for 44.9% of its sales.
Mark said the e-commerce business in SA had been profitable since inception. Ongoing collaboration between the UK and local digital teams was helping to strengthen website functionality, customer targeting, logistics and personalised communication, reinforcing the group’s omnichannel strategy.
Truworths’ reliance on credit leaves it especially exposed. While account applications surged to a record 5.5-million, only 15% were approved as the company maintained a cautious stance, it said.
The number of active accounts fell slightly to 2.9-million. Truworths said it had avoided chasing growth in higher-risk segments, but this restraint also limited sales momentum.
Broader household financial strain
The risks are worsened by broader household financial strain. According to Truworths, consumers are taking on greater credit commitments, particularly in the mass market, with higher monthly repayment obligations reducing disposable income.
Consumer credit health has improved only modestly, but the recovery remains fragile against a backdrop of weak economic growth and political uncertainty.
“Ineffective credit risk management could compromise the quality of the Truworths Africa accounts portfolio, leading to increased bad debts, slower collections, limited growth in new accounts and fewer customers utilising account facilities. This could result in slower credit sales and higher operating expenses, which will adversely impact margins,” the group said.
“A recovery in credit sales is vital for the turnaround in the performance of Truworths Africa. While there has been a significant increase in credit granted by several credit providers, Truworths Africa continues to maintain a prudent approach to credit granting, with sound credit risk practices and strong collection strategies. Truworths Africa continually monitors competitor activity to respond to changes in credit market dynamics,” the group said.
Banking on tech and local design capability
The group is also betting heavily on differentiation and technology to fend off global fast-fashion rivals. It continues to invest in its in-house fashion studio, local design capability and supply base to create a quick-response model for unique, higher-quality products.
New concepts, including premium smartwear for men and women and expanded beauty and accessories ranges, are expected to lift the offering.
Artificial intelligence (AI) is being rolled out across product design, buying and merchandising to improve planning and reduce duplication.
The new R1bn distribution centre in Cape Town is being phased in to improve speed and efficiency in replenishing stores.
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