Guiding consumers since 2009

Retailers struggle to cope with consumer debt

By Staff Writer
Nicolette Dirk, finance writer,
In the last six months, JD Group and Truworths wrote off R1 billion consumer debt due in the aftermath of customers struggling to deal with the high cost of living.
According to reports, JD Group wrote off more than R500m while Truworths wrote off R647m of consumer debt.
In a statement regarding the interim results for the six months ending 31 December 2013, JD Group said that during the period under review, the South African consumer environment continued to be difficult. 
“Subdued consumer demand, prevalent throughout the period, worsened during the 2013 festive season. This negatively impacted merchandise sales of household goods during the Group's peak trading period,” said JD Group.
They further stated that customers are facing continued pressure on disposable income due to increased living costs and higher debt-to-income levels, impacting spending on furniture and household goods.
Truworths also stated that the environment is particularly tough for credit retail. It added that 71% of the group’s sales come from credit related business.
Truworths further cited South Africa’s low GDP growth rate, rising inflation, weakened Rand, high unemployment, mining strikes, the high level of consumer indebtedness and the decrease in unsecure credit granted   as the reasons for the difficult environment most consumers are finding themselves in.
A review of Truworths’ financial period ending 29 December showed lower than planned sales growth and increased markdowns. As a result there was a lower gross margin and costs also increased more than sales. Headline earnings per share growth which increased by a disappointing 1, 4%.
Tough love attitude
During the period under review, JD Group said they have become more stricter about who they lend money to. “Newly introduced stricter credit granting criteria continued to reduce acceptance rates of credit applications, which further impacted sales negatively,” it said. 
Truworths also adjusted credit strategies from the second half of 2012 onwards. These strategies included more restrictive new account criteria, strategic changes in collection operation and refinement in scoring strategy.
According to Truworths the trading environment is expected to remain challenging for the balance of the 2014 financial period. 
“Product price inflation from the devaluation of the Rand is likely to be higher than 10% for the Group for the remainder of the financial period,” said Truworths.
In light of credit lenders claiming to take a tougher stance when it comes to lending, Moneybags investigated and came to a shocking revelation on how easy it still is to ruck up credit. To read more about this click here.

Recent Articles

Featured Are you entitled to your spouse’s pension after divorce?

Divorce means more than just parting ways with your partner. It may also involve parting ways with your assets. The Divorce Act states that your retirement fund forms part of your assets. This means that it will be considered when dividing up your assets.

Retrenched – what payments are you entitled to?

In the current struggling economic climate, retrenchments are a regular occurrence and not everyone survives the cut. If you find yourself on the receiving end of retrenchment you may have questions about the payments that are due to you.

Do you want to settle your debt?

You may be considering settling your credit account, whether it’s a credit card or various store accounts, now may be as good a time as any. This especially if you have saved, or you received a tax return or salary bonus. 

Can you afford a personal loan?

Taking out new debt is not always a choice. However, if you’re not pressed by a medical emergency or an unforeseen disaster, it’s worthwhile considering whether you can actually afford it. But what does it mean to “be able to afford a personal loan”? What percentage of your income should you not exceed dedicating to it? 


Eat for less on Tuesdays at Panarotti’s

Price: R59.99
When: Tuesdays
Where: Nationwide

Get discounts with Clicks ClubCard Seniors Programme

Price: Available on request
When: Daily
Where: Nationwide

Amani Spa Voucher Special

Price: R1000
When: Daily
Where: Cape Town, Jhb, and Port Elizabeth