eBusiness Weekly
Kudzanai Sharara and Kudakwashe Mhundwa
Edgars Stores Limited say sales merchandise for the half-year to June 2018 increased by 29 percent to $31,1 million from $24,1 percent posted in the comparative prior year.
The group’s profit before tax increased by 200 percent to $2,6 million in 2018 driven predominantly by the growth in sales. Basic earnings per share amounted to 0,74 cents from 0,22 cents.
The strong performance was on the back of a challenging operating environment characterised by foreign currency shortages which threatened profit margins and merchandise assortments.
The bulk of the revenue amounting to $19,5 million came from the Edgars Chain, where sales per square metre were up 30,35 percent to $1 958 from $1 502 prior year comparative. Units sold for the six months were 800 000, a 4 percent increase from 770 000 recorded prior year comparative. Chain profitability, however, decreased to 23 percent from 26 percent in 2017.
Commenting on the decline in profit, group financial accountant Buhle Mpofu said this was caused by an increase in low margin products as well as margin sacrifices.
“The contribution of the cellular and cosmetic product groups has increased over last year and these are low margin products. The Chain has also had to take margin sacrifices in certain products due to high input costs,” she said.
The Jet Chain, though contributing 38 percent of total merchandise sales, had a much better performance with total sales increasing by 37,93 percent to $12 million from $8,7 million. Sales per square metre were up 41 percent to $2,966 while units sold for the year were increased by 12 percent 1,05 million. The chain’s profitability increased to 17 percent.
Despite the growth in sales, the overall debtors book remain steady at both chains and management said customers are paying timeously, and the debtors book “is at its cleanest in years”.
Edgars Chain debtors were at $16,8 million from $16,3 million prior year comparative. Net write-offs for the period averaged 2,1 percent of lagged credit sales, which is lower than 8,7 percent recorded last year.
However fewer customers were able to make purchases in the Edgars Chain with active accounts at 102 874 which is 7 percent lower than 110 325 that made purchases prior year comparative.
However, there were more buyers in the Jet Chain with active accounts at 49 548 up from 45 584 prior year comparative.
There was also a marked increase in store expenses to $5,8 million from $5,2 million with management saying this was caused by credit card commission-due to the growth of payment by swipe and EcoCash.
Mpofu said this was also a result the variable element of rent, “Some of our leases have a turnover clause and we pay additional rent if turnover increases above the sets limits per lease agreement.”
Inventories amounted to $14,7 million from $14,1 million with management saying there was an element of inflation in the stock numbers. Given the foreign currency challenges to import products, Mpofu said the retailer has fully implemented import substitution and is procuring from local suppliers.
The newly established micro-finance division grew from a loan book of $0,6 million at December 2017 to $2,6 million at June 2018. Total revenue of $0,5 million has been earned for the six months. The division made a profit before tax of $62 000 after $88 000 allowance for credit losses.
Borrowings increased to $7,6 million from $4,6 million as a result of revamps, shorter supplier credit terms for merchandise inputs and micro-finance growth.
“We expect our borrowings to increase further in the second half in order to finance microfinance business (Club Plus) growth.”
There was, however, a marked increase in debt collection costs with Mpofu saying this was caused by Club Plus expenses.
Trade payables of $7,8 million include foreign liabilities and Edgars said it continues to engage its bankers in sourcing foreign currency to clear these from own balance sheet.
