Cash sales were king at Truworths International, but the slowdown in credit sales has curbed the group's growth, muddying the outlook for the fashion retailer. For the year ended June 26, Truworths reported cash sales growth of 129.7% and credit sales growth of 11% across all of its brands, including Office, Earthchild and Naartjie. In the same period, credit sales accounted for 53% of retail sales, compared to 70% in the previous year.Overall Truworths retail sales increased 46.1% to R17-billion compared to the same period last year.Operating profit increased 21% to R4.2-billion, while the operating margin declined to 24.9% from 30.5%.However, the group's share price fell 8.2% on Thursday after the results were released, suggesting the market was keying in a "disappointing outlook", said Kyle Rollinson, an equity analyst at Avior Capital Markets."Cash is carrying the business. Even though they are a credit retailer, if they have good products in the store they would still be able to sell on a cash basis," he said.story_article_left1"But cash is only 30% of their South African business. So 70% is growing below 10% - that's a major concern and it seems the affordability regulations are having a large impact on the group and will probably continue to do so."Introduced in September last year by the National Credit Regulator, the regulations are more stringent regarding the extension of credit to consumers and had a significant effect on the group's credit sales, which resulted in a loss of between R200-million and R250-million in credit sales from September last year."There's no hiding from the affordability regulations, but Truworths is probably the most exposed to them because of the business model," said Rollinson.CEO Michael Mark said it was not viable to transform the Truworths into a fully-fledged cash business."People are too poor - they can't afford to buy the clothing without credit, so we don't feel that we can make the call that we are going to become a cash business."When we looked at this situation a year ago we thought we would have a better year than we've had. The reasons for the slightly lower numbers arethe affordability regulations, and Office did not have as good a year as we would have liked."Truworths acquired a majority stake in Office, the high-street footwear retailer, for £256-million (R4.54-billion) last year, which analysts said gave Truworths a large hard-currency component to its business.This resulted in a 30% contribution to the group's turnover. But the knock-on effects on sterling after Britain voted to exit the EU may have also affected Office's performance.Mark said the management team in the UK "strongly believes that there were big challenges in the economy because of Brexit.block_quotes_start They don't know when and they don't know how bad, but they know that it might get bad block_quotes_endThey also did say they thought it was very unseasonable weather and those two things caused what they believe to be the major source of their problems."Office is a long-term investment, he insisted."We've got a strategy over the next two years to make an enormous difference to that business. Retail is a marathon, it's not a sprint so you can't evaluate an investment on the first six months of it," said Mark.Most South African retailers have been under pressure.According to StatsSA, retail trade sales rose 1.7% year on year in June after a 4.5% increase in May, against the market forecast for 3.8% growth. Textile, clothing, footwear and leather-goods retailers contributed 0.5 percentage points to total retail sales.Stefan Salzer, MD and partner at Boston Consulting Group, said: "South Africa is at the edge of an economic crisis, but sentiment overall is not much worse than a year ago.story_article_right2"But what you can see is that consumers differentiate in their behaviour."They know that it might get bad - they don't know when and they don't know how bad, but they know that it might get bad."Salzer said consumers were likely to cut back on discretionary spending and delay purchases, which means people cut back on buying extra clothes and jewellery."On the other side, some retailers that give consumer credit bought the sales by giving out bad debt. You inflate your top line, but you incur costs for having bad debt," he said.Mark, who after 24 years at the helm is the longest-serving CEO in the retail sector, is set to remain in the role until December next year."I've given an undertaking to the board that if they require my services I am available. But if they find an alternative earlier, then it will happen earlier," said Mark."I'm very excited about the next phase of my life, I've done my bit here. In the not so distant future I won't be doing it any more and I would be very pleased about that. It's not that I dislike what I do - there's other stuff waiting for me and I can enjoy my life a bit more."tshandup@sundaytimes.co.za..