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UPDATE 1-S.African retailers JD and Truworths write off $100 mln of consumer debt
February 20, 2014 / 3:06 PM / 4 years ago

UPDATE 1-S.African retailers JD and Truworths write off $100 mln of consumer debt

* Truworths writes off R647 mln vs R437 mln

* JD Group writes off R504 mln vs R184 mln

* JD H1 headline loss per share of 59.1 cents vs EPS 234.4c

* Truworths headline EPS up 1.4 pct to 335.8 cents

* Truworths ups dividend 6 percent to 216c/shr (Adds Truworths, writes through)

By Tiisetso Motsoeneng

JOHANNESBURG, Feb 20 (Reuters) - Two South African retailers separately wrote off a total of more than $100 million of consumer debt in the six months through December, underscoring a squeeze on shoppers brought on by rising interest rates, inflation and high unemployment.

JD Group, a credit-based furniture retailer, wrote off more than 500 million rand ($45.8 million), nearly triple the level six months earlier, as it swung to a first-half loss and suspended its dividends.

Separately, the country’s biggest listed clothing retailer Truworths wrote off 647 million rand of consumer debt, up nearly 50 percent.

Retailers in Africa’s biggest economy are among the local market’s biggest declining stocks of the past 12 months, amid fears about the impact on consumer spending of tentative economic growth, rising fuel prices and high household debt.

Consumer inflation accelerated to a higher-than-forecast 5.8 percent last month, raising expectations of a further interest rate hike and heightening concerns that debt-laden borrowers would struggle to keep up with loan repayments.

Nearly a quarter of South Africans have no job in an economy where average household debt accounts for 75 percent of disposable income.


“South Africa is a tough place to be for retailers,” said Roger Tejwani, an analyst at Johannesburg-based Noah Capital. “Also real wage growth is slowing and we’ve seen the first rise in interest rates in six years and there’s probably more on the way.”

JD Group reported a headline loss per share of 59.1 cents in the six months to Dec. 31, against earnings of 234.4 cents a year earlier. Headline EPS, South Africa’s main profit gauge, strips out certain one-off and non-trading items.

The company said it would not pay a first-half dividend because of the poor performance.

Truworths, which sells about three quarters of its products on credit, barely grew earnings during the same period, citing high default rates among its customers. Headline earnings per share (HEPS) increased 1.4 percent to 335.8 cents and the company said it would raise its dividend 6 percent to 216 cents per share.

In response to slowing growth at home, domestic retailers are increasingly looking to the rest of Africa for returns, but their expansion has been slow due to a lack of shopping malls and a weak supply chain infrastructure.

Upscale grocer and clothing retailer Woolworths quit Nigeria late last year, citing high rents and duties as well as the difficulties of marketing to consumers in Africa’s most populous country.

JD Group officials declined to give details of any prospective expansion into the rest of Africa, but its majority shareholder Steinhoff has said it plans to use the firm to expand in the continent and other emerging markets.

Cape Town-based Truworths said it would increase trading space by 10 percent but did not specify how much of that would be outside South Africa.

Truworths shares edged up 1 percent to 68.20 rand by 1449 GMT, having slumped last week to a three-year low of 64.86 rand. JD was up 1.4 pct at 25.40 rand, up from a near six-year low of 22.85 rand seen earlier this month.

Both stocks are down about 12 percent so far this year against a slight gain in the JSE All-share index. ($1 = 10.9115 South African rand) (Editing by David Holmes)

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