Truworths International Ltd., a South African clothing retailer, maintained full-year profit and boosted sales even as rising unemployment hampered consumer spending. The shares gained the most in five years.
Net income was little changed at 2.41 billion rand ($225 million) in the 52 weeks through June 29, the Cape Town-based company said in a statement today. Sales increased 7 percent to 10.5 billion rand, while the company raised the final dividend to 1.69 rand, beating the 1.60-rand average estimate compiled by Bloomberg.
Truworths shares rallied 8.1 percent to 71.05 rand at the close in Johannesburg, the steepest jump since May 2009. The gain more than halved the stock’s decline for the year to 7.4 percent, in line with a 7 percent decrease on the FTSE/JSE Africa Food & Drug Retailers Index. About 8.5 million shares traded, almost 3.5 times the three-month daily average.
“The expectation was that earnings would be far worse than they actually were,” Kaeleen Brown, an analyst at SBG Securities Ltd. in Johannesburg, said by phone. “They have been conservative with their book in the current difficult credit environment. It is what you look for.”
South African retailers are struggling as high unemployment and inflation force shoppers to cut down on major purchases. Retail sales were unchanged in June, the worst performance since December 2009. The South African Reserve Bank raised its benchmark interest rate for the second time this year on July 17, cutting disposable income for borrowers.
Truworths credit sales, which account for more than 70 percent of total retail revenue, rose 5 percent, the company said. That compares with growth of 9 percent in fiscal 2013.
The year was “characterized by pressure on consumers as a result of high levels of unemployment, industrial action, consumer credit retraction and increased basic living costs,” Truworths said.
Massmart Holdings Ltd.’s shares fell the most in more than eight years yesterday after the South African food and goods wholesaler owned by Wal-Mart Stores Inc. said first-half earnings declined as much as 29 percent.
Shoprite Holdings Ltd., South Africa’s biggest food retailer, fell the most since January on Aug. 19 after full-year profit missed estimates.