Financial Mail

Financial services are not the first thing one thinks about when considering traditional clothing retailers. For Woolworths and Truworths, though, these divisions are core to the delivery of the strong results both companies have just released. They are also elemental to future strategy - but in different ways. Truworths has worked hard to increase its account base over the past three years.

It has seen new accounts grow in the past year from 315 000 to 1,7m, changing the scale of its business materially by growing profits, margins, volumes and market share. Almost 79% of all Truworths’ sales are made through accounts, which are paid off over six months interest-free, or in nine to 12 months with interest. WHAT IT MEANS Bad debts and provisions are up Financial services still play a key role Credit will remain vital to Truworths’ growth and will be expanded in the coming year.

But CEO Michael Mark adds: “Our business is to sell clothes; we are not interested in growing a financial services business.” Woolworths, on the other hand, is. It grew financial services revenue by 35,5% by growing its debtors books by 25,3% and through an increase in interest rates. About 2m Woolworths customers make use of one or more Woolworths cards - the simple swipe card, the in-store card, or Visa credit card offerings. The in-store card drives 30% of all sales.

The retailer plans to mine this customer data to do better direct marketing and so drive sales harder. It will also cross-sell from its growing basket of short- and long-term insurance policies, and ultimately hopes the cards will encourage the higher-income food shopper to cross-shop and buy clothing from Woolworths. Historically, there has been an imbalance within Woolworths’ unique clothes/food hybrid. More affluent shoppers tended to go there for the food but not the clothing.

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