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Shares in Truworths rally nearly 7% as the retailer raises its dividend

by , 20 February 2015

Yesterday, Truworths International released its unaudited results for the 26-weeks to the end of December.

The company revealed that it barely managed to grow earnings and sales inched slightly higher. Yet Truworths will significantly raise its dividend.

The share price responded well to the news, ending the day strongly higher.

Let's take a closer look at what the results showed…


Truworths is dealing with consumers watching their spending


Truworths [JSE:TRU], the country’s third largest clothing retailer, posted “virtually no growth in half-year profit,” reports Fin24. This as consumers continue to watch their spending as they battle with high levels of debt and “high unemployment”.

Headline earnings per share came in at 334.5c for the period, says BDLive. That’s a 0.4% fall from the same period the year before.

Truworths did see a slight rise of 0.8% in its diluted headline earnings per share to 333.4c, adds Fin24. With the retailer relying on about 75% of its sales through its own store cards, it’s very sensitive to consumer sentiment.

Truworths says it expects the “trading environment” for the rest of its financial year to be “difficult,” notes MoneyWeb. But the company should reap the rewards of recent acquisitions of “upscale kids clothing businesses”.

This includes its plans to take over Earthchild. Truworths announced this in October last year.


Truworths raised its interim dividend 9%


One positive in the company’s statement was its decision to increase its interim dividend by 9%, says BDLive. That takes it to 236c a share from 216c compared with the same period in 2013. The company made the decision to up its dividend cover, which had fallen from 1.6 times in 2013 to 1.4 times in 2014.

The retailer reported an increase of 5% in sales, bringing that to R6 billion, reports MoneyWeb. Truworths says this was thanks, in part, to “consumers buying low-margin and marked down products in cash”.

Shares in the retailer responded favourably to the results. By market close yesterday, shares were up 6.76% at R87.01.

So a positive reaction by investors to Truworths results for the last six months of last year. Time will tell if its acquisitions pay off.

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Shares in Truworths rally nearly 7% as the retailer raises its dividend
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