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Managing stakeholder relationships — Truworths

Customers

Five point internal rating scale

Rationale for engaging: As the buyers of merchandise, customers are the primary source of revenue for Truworths. Engagement covers all account and cash customers in South Africa and the rest of Africa. Store management and employees, call centre and customer relations employees are the main contacts with customers. Engagement occurs informally in stores, formally through call centres as well as through social media platforms such as Facebook.

Key engagement
issues

Response to
engagement issues

Most customers pay their monthly accounts in store and were not able to pay these accounts during lockdown when all stores were closed for five weeks.

Alternative payment channels were introduced ahead of lockdown to aid account collections, including several digital payment options as well as enabling payments to be made at major food retail chains which continued to trade during lockdown.

Many customers were under financial pressure due to the impact of lockdown on their income.

Truworths recognised the financial stress facing many of its customers. Account portfolio interventions were introduced, including a one-month skip payment for customers whose accounts were in good standing and likely to repay their accounts, while the charge-off to bad debts was postponed for a month for a limited number of customers.

Health and safety in stores a key concern for customers.

Strict COVID-19 health and safety protocols were implemented. Stores were adapted to be COVID-19 compliant to ensure the safety of employees and customers during the pandemic. In-store layout was adjusted where necessary to meet social distancing requirements while the number of customers permitted in stores was also limited. Store employees were all issued with perspex visors and cloth masks together with spray bottles of sanitiser available in store which is constantly replenished from our Head Office. Specific protocols are followed before merchandise is returned to the floor to ensure customer safety.

Employees

Five point internal rating scale

Rationale for engaging: Employees provide their talent and skills to ensure the business operates in an efficient and sustainable manner. Engagement includes all full-time and flexi-time employees, with line management being the key point of engagement, supported by the Human Resources Division. Employee engagement occurs through formal communication and surveys issued by the business, formal and informal training, personal interaction with line management, the online platform to engage directly with the CEO, through in-house presentations covering various topics such as business performance, as well as through the WhatsApp communication channels set up before the national lockdown in March 2020.

Key engagement
issues

Response to
engagement issues

The well-being of staff was paramount throughout the crisis.

Communication with employees was critical in providing business updates, educational information on COVID-19 and steps being taken to mitigate the financial impact of the pandemic and lockdown on operations. Regular communication was undertaken with all staff via digital platforms.

All business units were prepared for staff return in accordance with COVID-19 regulations. A digital screening app was developed for all staff to complete COVID-19 screening on their personal mobile phones prior to arrival at work every day.

Impact on employees who were not able or required to work from home during lockdown.

Employees who were not required to work from home or unable to do so used their remaining special leave and annual leave, before utilising unpaid leave. Leave provisions were extended with a once-off extra five working days leave being granted to those employees who tested positive for COVID-19 or were required to self-isolate.

Financial impact on employees who were not required to work during lockdown.

The company applied for Unemployment Insurance Fund COVID-19 Temporary Employer/Employee Relief Scheme (TERS) benefits on behalf of qualifying employees. The company further provided temporary loans to employees waiting on TERS benefits.

An internal fund was established to financially assist lower-earning staff in financial need if short-paid due to the pandemic. The Truworths directors, divisional directors and other senior management of the company offered to donate up to one-third of their remuneration for up to three months to the fund. The government TERS scheme and annual leave enabled employees to earn their normal remuneration during the pandemic. The remuneration sacrifice was applied to top up some of the lower-earning staff who had inadequate leave and to subsidise some additional leave for others.

Suppliers

Five point internal rating scale

Rationale for engaging: Suppliers are the providers of merchandise and other goods and services to Truworths. This includes local and international product manufacturers as well as landlords. The primary sources of contact are executives, merchandise buyers and management. Engagement occurs formally and informally through supplier assessments, merchandise design and order negotiations, account management interaction and supplier development discussions.

Key engagement
issues

Response to
engagement issues

Merchandise suppliers:
Ahead of the start of the lockdown Truworths began negotiating with suppliers to delay orders and in extreme cases cancel orders to manage stock levels.

Sales forecasts were adjusted and stock levels were required to be managed accordingly. Throughout these difficult negotiations the merchandise teams recognised the importance of maintaining healthy relationships with suppliers and aimed to limit the financial impact on both parties. Stock levels in Truworths were well managed through this process. Inventory levels were only 3.1% higher at the end of the reporting period despite stores being closed for five weeks during lockdown, with no winter over-stock and no impact on the gross margin.

Local merchandise manufacturers:
The restrictions on local manufacturers during the hard lockdown, followed by periods of working at reduced capacity, placed a significant financial burden on local suppliers, many of whom entered the lockdown already under financial pressure. Production capacity was also curtailed due to health and safety, and social distancing requirements.

Truworths is committed to ensuring the sustainability of its local supply base. Assistance measures were implemented to stabilise the operations of several cut-make-trim businesses which not only preserved jobs but also helped to ensure the sustainability of these key partners in the Truworths supply chain.

Property landlords:
The negotiation on the payment of rentals during lockdown when stores were restricted from trading, and once lockdown restrictions were relaxed, was a major challenge for both Truworths and landlords.

Management initially negotiated rentals collectively through the National Clothing Retail Federation (NCRF) with an alliance of retail property landlords but thereafter chose to deal directly with landlords. Agreements on rental payments were reached with most landlords. Truworths ultimately paid approximately 15% of total rentals due during the lockdown, as a concession to most landlords and to maintain sound relationships with these key stakeholders.

Regulators

Five point internal rating scale

Rationale for engaging: Regulators are the custodians of legislative and regulatory compliance and providers of licences to trade. This includes government departments, regulatory bodies and local authorities, with the engagement being managed by the executive directors and finance, legal and account risk executives. Engagement occurs through regulatory filings and submissions, formal and informal discussions regarding key issues, and through the NCRF.

Key engagement
issues

Response to
engagement issues

Engagement with government departments including the Department of Trade, Industry and Competition, the Department of Employment and Labour regarding clarity on the burdensome and constantly changing lockdown regulations.

Executive directors engaged with government directly and through the NCRF on the reopening of the economy through the various levels of lockdown, providing insight into the issues faced by Truworths and retailers in general to inform the lockdown regulations.

Engagement with revenue authorities regarding the significant reduction in corporate tax and VAT payments as a result of the national lockdown, as well as in relation to the deferral of payments.

Senior management engaged with revenue authorities through informal meetings and formally in writing regarding the level of corporate tax and VAT payments. Truworths applied for deferral of certain tax payments but achieved limited success in this regard.