How The Times Have Changed
I was reading an article last night highlighting certain investment shares that lets say have not performed as expected. If you had bought a blue chip Truworth share in 2015 it would have cost you R55 ($3) and today you would pay R55. Truworth's is a clothing retail chain in South Africa and Europe having other stores under it's umbrella.
The scary part about this particular investment is the dividends have decreased by 75% and has been on the slide. Turnover has nearly doubled over the last decade rising from R11.3 billion in 2015 to R21.3 billion in 2025. The problem is the profits have not doubled and have moved from R2.46 billion to 2.79 billion. The problem is costs of doing business have risen sharply which affects the bottom line and the profits have only increased by 10% or 1% per annum.
The turnover having nearly doubled is also misleading as we know inflation on clothes has affected the sales price and will influence total turnover. Those retailers keeping the prices down have to reduce the clothing quality to undercut competitors. Online sales has taken hold with a high percentage of shoppers under 40 years of age shopping online. Bricks and mortar retailers are under attack having higher costs such as rent and salaries.
Truworth's on paper is a stagnant business and if nothing changes will not be around come 2035. If you were a share holder you would be looking around for other opportunities offering a better return.
I expect many investors will be drawn into crypto and getting involved in the likes of staking and DeFi. Why wouldn't you knowing over a 10 year period with the likes of daily rewards you are able to compound growth your investment. Receiving dividends one per year just does not offer the same type of potential and opportunities we have online with crypto.
You always hear about the risk with crypto due to volatility and we have just experienced one of those volatile dips so this is real. The difference however is crypto does bounce back far quicker than real life investments and the earnings are happening daily so your investment is accumulating continuously. If you purchase 1000 shares you will still have a 1000 shares at the end of the year and if you want to grow your share holding you need to reinvest your dividends or invest new money. In crypto it is one clink of your mouse and you can increase your investment instantly using your daily rewards.
The Truworth's shares over the last decade is a prime example of how easy it is to fall into a trap of having a stagnant investment. Truworth's is one of many in the same position and unless things change drastically the share price is not likely to rise any time soon if ever. This is what we call in crypto sideways movement or the accumulation stage in our cycle except this cycle has been 10 years and is ongoing. The figures which would lure investors into purchasing shares is not there and I would suggest this type of investment is far riskier than crypto.
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True. The Stock market is more and more driven by a couple of tech stocks. If you have those Mag7 you did and do well. Most of the rest is poor and doesn’t beat the Index.
I think the old model of investments, for the most part, no longer work as expected. The landscape of doing business has also changed a bit with the growth of the digital world, many are moving online or having an base here. Better to cut stagnant investments and at least look into emerging markets/industries.
Having recently visited the US after a few years away, I can say that the retail sector does seem to be in a tough spot. Prices on everything seems to have skyrocketed since covid, and Amazon is eating everyone's lunch. I have a few stocks I have been holding onto for awhile that are in a pretty similar situation to Truworth (although perhaps not as dire). It is hard to let go of investments that have taken a hit, but it is good to evaluate them every once in awhile and try to see if it is time to cut your losses, something I still find difficult to do.
This is hard to do because in the back of your mind there is a chance things can change which they can, but unlikely.
Yes, exactly! It hurts when you sell something and it changes for the better, so in the back of your mind you think this will happen for other things.