- Purchase of two childwear chains in past year propels advance
- Revenue grows despite muted South African consumer confidence
Truworths International Ltd., the South African clothing retailer that’s bought two childrenswear chains in the past year, rose the most in six years after sales growth accelerated and cash purchases outpaced those using credit.
Revenue gained 19 percent in the 18 weeks through October, the Cape Town-based company said in a statement on Thursday. That compared with 4.7 percent growth in the same period last year. Cash sales rose by 25 percent, compared with a 17 percent gain in credit purchases.
“This is a big surprise,” Alec Abraham, an equities analyst at Sasfin Securities in Johannesburg, said by phone. “In the past two years volume growth has been negative and now being positive, it’s a big turnaround.” Abraham had expected retail sales growth, excluding the Earthchild and Naartjie purchases, to be half of the 16 percent reported by the company.
The shares gained as much as 10 percent, the most since August 2009, and traded 9.7 percent higher at 105.83 rand as of 11:44 a.m. in Johannesburg, the highest since February 2013. The stock is up 37 percent this year, valuing the company at 45 billion rand ($3.2 billion). The Foschini Group Ltd., which is also expanding its childrenswear offering in South Africa, gained as much as 5.2 percent after Truworths’ trading update.
Truworths bought Earthchild in March and the South African clothing-retail business of Naartjie a month later as it sought growth opportunities in a muted South African market. Unemployment of 25 percent, rising power costs and high fuel prices are putting pressure on shoppers to cut down on purchases.