Hyperinflation forces Truworths to narrow debtors’ book

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  • Active accounts reduced by 0.5%
  • Doubtful debts down 1.7 percentage points compared to prior period
  • Revenue from contracts with customers also consequently down
  • Easing of inflation since the year end could however see an increase in customer accounts

Harare – Zimbabwe Stock Exchange (ZSE) listed Casual and footwear retailer, Truworths Limited reports that it has had to cut down on granting customers credit sales while increasing interest rates for debtors as a means of coping with hyperinflation and currency devaluation in Zimbabwe.

Truworths has over 18 branded stores located in the major towns and cities of Zimbabwe and retails and sells fashionwear and accessories under different brand names, including Daniel Hechter, Truworths Man, Ginger Mary, Zeta Inwear, Identity and LTD.

In a statement accompanying the company’s results for the year ended 12 July 2020, the company board chairperson, Mordecai Mahlangu, stated that the company has had to adopt a credit management strategy that ensures that the company does not make a loss as a result of hyperinflation devaluing debts.

“Due to hyperinflationary conditions, the business has had to conservatively and judiciously manage the granting of credit, as a result the number of active accounts decreased by 0.5%,” said Mr Mhlanga.

Furthermore, the company has had to reduce the period which one gets to pay for their purchases while simultaneously increasing interest charged.

“The tenure of the credit period was reduced and monthly interest charges were reviewed upwards.”

This development has led to a reduction of doubtful debts as a provision of gross debts from 15.2% in the prior year to 13.5% in the period under review.

At the same time, total revenue from contracts with customers fell marginally from ZWL147,8 million to ZWL146,1 million in inflation adjusted terms.

According to ZimStat the retail inflation, measured by Consumer Price Index (CPI) fell to 659.40% in the month of September 2020 shedding 101.62 percentage points as compared to 761.02% in August this drop came after a record peak of 837.53% experienced in July.

The spike in inflation since October 2018 was on the backdrop of reintroduction of the local unit leading to the weaker Zimbabwean dollar failing to hold against the stronger USD until only a few months ago.

As a result, inflation is now easing on the back of the Zimbabwean dollar constantly gaining against the United States Dollar since the 1st of September after the reintroduction of the foreign currency auction system which resulted in prices of commodities and services stabilising and a stable parallel market rate.

This stability could consequently drive the group to reconsider their position on granting credit.

Equity Axis News.

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