Truworths (TRU) – What a difference two Elections make

When TRU acquired Office a week before the ZAR blew out on 11 December 2015, the acquisition seemed incredibly well timed. However, following the UK Brexit vote and the municipal elections in South Africa, the ZAR strengthened considerably against the GBP. We show however that the UK clothing and footwear downturn preceded the Brexit vote by seven months, and inventory build-up now is a key concern. In SA, while management lays much of the blame of a tough 2H16 on the tougher credit regulations, we think that factors such as fashion calls may have played a part as both Truworths and Identity received poor reviews in our Winter range assessments.