Truworths blames informalisation for sales decline

Audrey Galawu

TRUWORTHS Limited Zimbabwe recorded a decline in units sold which the company attributed to the informalisation of the economy, which has resulted in cheap and fake imports selling at below local and international manufacturing costs.

Informalisation of the economy has resulted in cheap and fake imports selling at below manufacturing costs, which the business could not compete against.

In its 2024 interim report, the company revealed that units sold declined by 33.8% due to the suspension of ZWL$ credit from 1st of July 2022.

In the previous year, several retailers and manufacturers have bemoaned the competition brought about by informalisation which they said is not viable.

Informal traders

The informal sector continued to expand at the expense of the formal retail sector as a result of exchange rate distortions in the market, with customers resorting to buying products in the unregulated informal market at prices which the business could not compete against.

TRUWORTHS also suffered ZWL$ cash sales decline due to the price controls enforced by the Financial Intelligence Unit through the use of the official (exchange rate) in the sale of merchandise.

“The business maintained competitive US dollar pricing in order to be able to compete on a US dollar basis, translating the US dollar price to ZWL price at the Auction Rate resulted in the uneconomic ZWL prices and loss of value.

“The Economic Environment continues to be uncertain, unstable and complex. To return to sustainable profitability, the business needs to offer credit in a stable currency and access long-term funding at affordable interest rates. Regrettably, these conditions do not currently exist in the Zimbabwean economy.

“We remain hopeful that currency reforms will lead to stability and improved liquidity,” reads the report.

TRUWORTHS also reported that the debtors book declined as ZWL$ credit sales were stopped in July 2022.

The decline was due to the increase in the prime interest rate to 200% per annum, which made credit sales unviable for the business.

However, the business resumed credit sales in February 2023 but only in USD.

Commenting on Truworths’ woes, financial expert Sylvester Mupanduki said there is need to realign strategies and adopt new perceptions that fit with today’s economy which is highly informalised.

“Challenges are intensifying for fashion businesses like Truworths, with soaring operating costs and shrinking profit margins pushing them to the edges. This entails vigilant monitoring of budgets and cash flows, as well as streamlining operations by considering the closure of some locations to reduce costs.”