eBusiness Weekly
Business Writer
Edgars Stores Limited says it continues to remodel the business to capitalise on opportunities that arise in the operating environment while cost containment remains a focus area to ensure long term viability of the business.
The clothing retailer said authorities need to step in and implement various measures to help stabilise the foreign exchange market and tame inflation.
Thembinkosi Sibanda, the Edgars Limited group chairman in a statement of financials for the 52 weeks ended 08 January 2023, said the group seeks to expand its geographic footprint through the opening of new stores in strategic locations.
“Smart merchandise procurement and optimal inventory planning remain key focus areas to ensure that target margins are achieved without compromising the merchandise quality.
“We will continue to transform our customer experience through updating our stores to world class standards, offering widened merchandise ranges at affordable prices and flexible credit terms,” he said.
He indicated the recovery of the business is premised on the back of improved access to foreign currency through domestic sales to cover import requirements, a stable exchange rate and slower inflation.
He noted that on the currency front, the environment has remained turbid marked by the sharp depreciation of the local currency.
However, notwithstanding the challenges in the operating environment, the group managed to close the period with an improved performance with revenue increasing 51,7 percent to $35,9 billion from $23,7 billion.
“The growth in real terms is attributed to volume recovery, replacement cost-based pricing, ongoing cost management as well as initiatives implemented by management to ensure fresher stock availability in our stores, regardless of the supply chain challenges,” said Sibanda.
The group’s profit before tax of $1,9billion was a decline of 5,7 percent from the prior period of $2,0 billion.
Sibanda said profit for the year was weighed down by higher finance costs emanating from the revision of the minimum lending rates to 200 percent as promulgated by the Reserve Bank of Zimbabwe.
“The result was the finance costs of $4,3billion, a growth of 117 percent on the prior year of $1,9billion. The business was not able to recover these costs from our customers,” he said.
During the period under review, total group units sold increased by 13,1 percent from 2,4 million to 2,7million compared to the same period last year.
Sibanda said trading in foreign currency since April 2020 has allowed the retail chains to improve stock assortments, which in turn has increased traffic in-stores.
“While a sizable portion of our cash sales are in foreign currency, we believe that this proportion can be increased through favourable and consistent application of regulatory policies around trading in foreign currency,” he said.
Sibanda said funding was channeled towards growing the debtors’ book as well as store expansion initiatives.
“At the end of the reporting period, the company had US$134 000 foreign liabilities which it will be able to service from existing resources,” he said.
In terms of retail performance, total retail merchandise revenue amounted to $26,2billion representing a 36,8 percent increase from prior year.
“The split between credit and cash sales for the ZWL was 48,8 percent compared to 61,2 percent in 2022 and 51,2 percent from 38,8 percent in 2022 while the USD sales had credit sales contribution of 71 percent and cash sales of 29,0 percent,” said Sibanda.
During the period under review, the Edgars chain recorded turnover of $14,6 billion up 41,6 percent from prior year of $10,3 billion, and the 1,16 million units sold were up 21,1 percent from 956 000 in the comparative period.
The split between credit and cash sales was 54,5 percent and 45,5 percent while the USD sales had credit sales of 71,6 percent and cash sales of 28,4 percent.
“We revamped our Masvingo store in November 2022. Stock covers closed at 11 weeks,” said Sibanda.
Total sales for the Jet chain were $11,7billion up 35,58 percent from $8,6 billion achieved in the comparative period.
He said the split between credit and cash sales for ZWL was 43,1 percent and 56,9 percent while the USD sales had credit sales of 70,3 percent and cash sales of 29,7 percent.
Total units sold for the period were up 7,9 percent from 1,44 million to 1,56 million. “The Chain increased its store count to 36 stores from 31 stores in the comparative period. Stock covers closed at 13,7 weeks,” he said.
In the group’s financial services, the gross retail debtors’ book closed the period at $8,2 billion up 24,0 percent from $6,56 billion in the comparative period with the USD debtors book ending the year at USD6,6 million while the ZWL book closed the year at $2,5 billion.
Sibanda said active account growth for the USD book grew to 64 000 accounts attributed to various account drive initiatives.
The asset quality as at January 08, 2023 was 90,4 percent for the USD book and at 61,5 percent for the ZWL book in current status.
He said expected credit losses (ECLs) as at January 08, 2023 were 4,0 percent of the book compared to 1,9 percent as at 09 January 2022.
“Although this reflects management’s prudent application of the related credit loss accounting standards, the ‘deterioration’ was fuelled by the increase in ZWL interest rates in July 2022 in line with RBZ government directives,” he said.
The loan book at Club Plus Micronance closed at $698 million representing a 34 percent increase from prior year.
Asset quality remains positive with over 82 percent of the USD book being in current while the ZWL book was 54,5 percent in current with effect of the 200 percent interest rate adjustment still being felt.
“Improved efficiencies in loan approval and disbursement processes have resulted in increased turnaround.
“We have seen an increase in the uptake of loan applications through our digital platforms, which has provided our customers with added convenience,” he said.
Carousel Manufacturing, the manufacturing division, recorded a turnover of $2,4 billion up 102 percent over prior year. Total units sold were down 12,66 percent to 141 000.
“Revenue was adversely affected by depressed sales in the retail space. Management pursued alternative markets mostly in the local corporate wear sector and beyond our borders.
“This initiative resulted in an increase in sales contribution from the open market which accounted for 39 percent of total sales,” said Sibanda.
