South Africa’s Truworths flags lower H1 profit on tighter credit rules

South Africa’s Truworths flags lower H1 profit on tighter credit rules
Pedestrians walk past a branch of South African clothing retailer Truworths in Cape Town

Pedestrians walk past a branch of South African clothing retailer Truworths, in central Cape Town, February 18, 2016. REUTERS/Mike Hutchings

JOHANNESBURG (Reuters) – South African clothing retailer Truworths International expects lower half-year profit as in-store credit sales stalled due to tougher regulations, the firm said on Thursday.
Truworths said diluted headline earnings per share for the 26 weeks to 25 December will decrease to between 380.6 cents and 397.9 cents per share, up to 6 percent lower than in the corresponding period in 2015.
The firm said new credit affordability assessment regulations – rules introduced by South Africa in 2015 that require banking statements and proof of income – weighed on sales.
South African clothing and furniture retailers rely heavily on in-store credit cards to boost sales in a sluggish economy.
Truworths said its total retail sales rose 21 percent to 10.2 billion rand ($756 million), but cash sales accounted for all of the growth, while credit sales remained unchanged.
“Increased pressure on consumers from rising inflation, especially in food prices, and a weak employment market characterised by job losses and soft real growth in incomes have also impacted the Group’s performance,” Truworths said in a statement.
The trading update was released after the close of trading on the JSE.