Truworths, a leading South African clothing retailer, is planning to grow its customer base and expand its credit offering despite mounting pressure on household finances. The company faces regional pressure and lower annual profits, but credit remains central to its South African business. Account customers are responsible for 71% of Truworths Africa's retail sales. The company uses store credit to help customers buy its merchandise, particularly in the middle-income market.
The pressure on consumers was reflected in collections, which became increasingly difficult during the year as customers faced higher debt commitments and weaker disposable income. The TransUnion Consumer Credit Index fell to 49 in the second quarter of 2026, below the neutral level of 50. This decline was accompanied by more accounts falling at least three months into arrears, higher revolving-credit use and stressed borrowing, and weaker household cash flow.
Truworths' CEO, Michael Mark, said the company deliberately restricted credit granting as household finances came under pressure. The share of Truworths Africa account holders able to buy fell from 79% to 77% due to economic hardship. Active accounts remained broadly unchanged as Truworths' credit risk scorecards limited lending. The company opened more than 895,000 new accounts during the period, 7% more than the previous year.
The company plans to use more targeted lending and technology to expand the account base while controlling risk. Its plans for the 2027 financial year include converting more loyalty customers into account holders, diversifying its credit products, and using customer data to improve targeting. Truworths also plans to introduce AI-assisted collections and use alternative data to support credit decisions.
Truworths has expanded its shorter-term credit offering, allowing selected customers to use PAY3 to split purchases into three interest-free payments. The company plans to extend the product and introduce third-party BNPL options in 2027. For customers who do not qualify for credit, Truworths offers a three-month lay-by facility, allowing them to pay for merchandise before taking delivery.
The challenge for Truworths is that the same consumers it wants to attract and retain are operating in an environment where debt repayments are rising and household cash flow is under pressure. The company's expected credit loss allowance on active trade receivables increased to 21.7% from 20.8% a year earlier. Net bad debt and expected credit-loss allowances rose to R1.29bn from R1.16bn.
Despite the pressure, Truworths remains focused on affordability and risk rather than simply increasing lending. The company says it expects discretionary spending to remain constrained in the near term, although it expects conditions to improve gradually if inflation moderates, fuel costs ease, interest rates stabilise and consumer sentiment improves.
Key points
- Truworths plans to expand its credit offering and grow its customer base despite consumer financial strain.
- The company's credit book is central to its relationship with customers, particularly in the middle-income market.
- Truworths is using targeted lending and technology to control risk and expand its account base.
