Stock exchange suspends trade in struggling Truworths Zimbabwe shares

By Business Report

Trade in the shares of Truworths Zimbabwe, in which the JSE-listed Truworths has a 34% stake, have been suspended from the country’s stock exchange to enable the struggling clothing and apparel retailer to sort out its going concern status over the next three months.

Zimbabwean retailers are struggling in an increasingly informal market. Retailers in the southern African country have complained of higher taxation and the effect of cheaply imported textiles products as having a toll on their earnings potential.

For Truworths Zimbabwe, these challenges have resulted in the company shutting down branches. The company expects the outlook period to be “uncertain, unstable” and complex, especially after the suspension of its shares from the Zimbabwe Stock Exchange (ZSE).

“The Zimbabwe Stock Exchange Limited hereby notifies the investing public of the voluntary suspension from trading in shares of Truworths Limited with effect from 7 March 2024,” ZSE CEO Justin Bgoni said yesterday.

The suspension is for a period of three months and is earmarked to “provide Truworths with the opportunity to address the going concern aspects of the business and ensure compliance with ZSE- listing requirements” regarding its delayed publication of its financials for the year ended July 2023.

“This temporary suspension aims to give Truworths the necessary time to rectify any concerns and meet the regulatory obligations stipulated by the ZSE,” added Bgoni.

JSE-listed Truworths said yesterday that the Zimbabwe-listed entity was an entirely different legal entity separate from the South Africa incorporated Truworths International and Truworths Limited.

“The said suspension has been requested by the board of Truworths Zimbabwe and approved by the Securities and Exchange Commission of Zimbabwe. The Group has a 34% shareholding investment in, and non-executive director representation on the board of, Truworths Zimbabwe,” said Truworths International.

It further stated that the 34% investment it has in Truworths Zimbabwe, held since 2002, had been acquired at a non-material cost and had been fully impaired by the group in prior years. The group had not made an financial assistance, whether in the form of loans, guarantees or otherwise, to Truworths Zimbabwe while it also did not have any operational involvement in the Harare listed company.

To return to sustainable profitability, Truworths Zimbabwe needed “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,” the company said recently. However, it remains “hopeful that currency reforms will lead to stability and improved liquidity” on the market.

The company’s debtors book has plunged after it stopped Zimbabwe dollar credit sales in July 2022 “due to the increase in the prime interest rate to 200% per annum which made credit sales unviable” for the business.

However, Truworths Zimbabwe resumed credit sales in February 2023, but only in US dollar terms. Units sold over the full year period to July 2023 were negatively affected by “informalisation of the economy which resulted in cheap and fake imports selling at below local and international manufacturing costs,” the company said.

The business could not viably compete against these imports, it added.