SALT-RIVER-based fashion retailing house Rex Trueform (Rextru) – which owns the Queenspark chain - slipped into the red in the year to end June. After a shabby interim showing the company
appeared to find trading conditions in the second half even tougher.
RexTru – controlled for decades by the Shub family – reported a rather surprising 10,7% drop in revenue to R484m with gross profit falling 14,5% R243m. With group operating costs increasing 1,8% to R265m (included a R3m retrenchment provision after reorganising Queenspark) operating profit reversed from R27m in 2012 6.6 million to a loss of R19m.
Rextru directors said the gross profit margin in the Queenspark retail business decreased to 51,3% from 53,6% mainly due to product inflation pressures resulting from the weakening of the rand. The performance is out of synch with larger fashion retailing companies like Foschini, Mr Price, Pepkor and Truworths – all of which appear to have weathered to tough trading conditions with more style at bottom line.
Things still look threadbare for the year ahead. Directors noted the outlook for retail sales continued to be impacted by the slowdown in the growth of economy, consumer debts levels, tight lending standards and rising living costs. They added that the on going weakness in the Rand exchange rate against the US Dollar would continue to add inflationary pressure to the cost of merchandise. And to top it all Rextru directors also bemoaned the fact that international brands continue to enter the local clothing retail market, intensifying industry competition.
Not surprisingly, the directors warned that Rextru’s retail segment would remain under pressure in the 2014 financial year. But they did refer to “certain strategic initiatives” initiated during the year that were expected to positively impact the year ahead. Unfortunately no further details were provided.
Fortunately, Rextru has traditionally been conservatively managed, and currently sits with almost R100m in cash (and no debt.) This balance sheet cushion should allow Rextru to absorb any further blows to trading, and allow management to work prudently on a turnaround strategy.
By Jenni McCann