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Economic slowdown to hurt Rex Trueform’s FY’14

December 20, 2013 (South Africa)

After posting muted earnings in the second six months of the fiscal year 2013 amid slowdown in the South African economy and weak rand against US Dollar, the local clothing retailer Rex Trueform is set for another flop show in the 2014 financial year.

The company is grappling with dull retail sales amid gloomy economic outlook, higher consumer debts levels, tight lending standards and rising living costs.

As indicated in its financial statements for the year ended June 30, 2013, the turnover of Rex Trueform Clothing Company's retail segment, which operates a nationwide chain of Queenspark and J CREW stores, decreased by 10.6 per cent to R474.4 million as against R530.6 million in 2012.

The gross profit margin decreased to 51.3 per cent compared to 53.6 per cent in 2012 mainly due to product inflation pressures resulting from the weakening of the Rand. The retail segment’s operating profit also decreased sharply by 151.3 per cent, resulting in loss of R14.7 million for the year.

The world’s favoured retail destination, the Republic of South Africa, which enjoys annual sales of more than R50 billion is in grip of serious economic slowdown with the economy expected to grow 1.9 percent this year, the slowest since a 2009 recession, according to central bank estimates, short of the more than 5.4 percent the government estimates.

Adding the woes, ongoing weakness in the South Africa’s rand exchange rate against the US Dollar will continue to add inflationary pressure to the cost of merchandise. The doldrums in rand was fueled by record cash outflows, as continued signs of growth in the US boosted dollar and forced foreign investors to dump local currency.

In addition, international brands continue to enter the local clothing retail market, intensifying industry competition.


Fibre2fashion News Desk - India

 
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