Truworths braces for heavy blow to earnings from coronavirus

The coronavirus
pandemic is likely to have hit Truworths hard, the retailer has warned, with its
full-year earnings facing a possible drop of some 30{e93887a69cdd95d753f466db084bbc3aa0067124675315461d28d68a72842cc2} and the payment of a
dividend unlikely.

In a trading
statement issued after markets closed on Tuesday, Truworths said the requirement
to close all store premises in all its countries of operation during lockdown
periods – some of which remain in force – had had a “significant
impact” on its businesses.

Both its
UK-based shoe chain, Office, and the Truworths business, namely the fashion
retailer in South Africa, have been impacted.  

Management
has been working actively to mitigate the damage, the retailer said, with
priorities being to cut spending and preserve cash. Truworths
has also extended the term of its borrowing facilities, according to the statement, in a bid to boost liquidity in the medium term.

But Office in
particular had already been contending with negative consumer sentiment and
Brexit-related uncertainty, Truworths said. Restructuring is a possibility for the
shoe retailer, but management is “considering all possibilities” and
engaging with advisors.

The group
said it would have to take an impairment relating to Office as a result, but
the details were still uncertain. However, impairments of the Office trademarks
and right-of-use assets could mean the group records a decline, or possibly a
loss, in earnings per share, compared to the previous year.

The group is
expecting headline earnings per share (HEPS) to drop by around 30{e93887a69cdd95d753f466db084bbc3aa0067124675315461d28d68a72842cc2}, or 174
cents, for the period.

“Given
the current uncertainties in quantifying the impairments, it is not possible to
provide an indication of the percentage decline in EPS with reasonable
certainty at this stage,” the retailer said, adding that the board will
provide further details at a later stage.

Analysts have previously warned that Truworths and TFG are among the apparel retailers likely to be harder by the lockdown period due to clothing and accessories’ contribution to their total revenue.

Shares in
Truworths [TRU] closed 2.73{e93887a69cdd95d753f466db084bbc3aa0067124675315461d28d68a72842cc2} lower at R29.93.

Compiled by Marelise van der Merwe