Edgars sales decline

CLOTHING retail chain, Edgars Stores Limited, recorded a 29,4 percent drop in units sold during the financial year ended 10 January 2021 to 2,4 million from 3,4 million in the prior year.

The rising cost of doing business, liquidity constraints, high cost of borrowings, Covid-19 challenges as well as generally low disposable incomes made the operating environment difficult for the business, said the company in a latest trading update.

It noted that when the Government re-introduced level four lockdown towards the end of the fourth quarter, business suffered as trading was suspended.

“Year to date turnover for the trading period to 10 January 2021 was down 17 percent in inflation adjusted terms and up 494 percent in historic terms.

“Units sold for the year to date declined to 2,4 million from 3,4 million last year,” said the group.

Demand for the quarter declined to 995 000 units from 1 224 000 units last year but was up from 585 000 units in the third quarter.

“Borrowings at the end of December trading period were ZWL$245 million.

“The group did not have any material foreign denominated debt at the end of the quarter,” said Edgars.

The group’s business units are Edgars chain, Jet chain, Carousel manufacturing and a financial service firm. At Edgars, year-to-date unit sales of 888 000 were down 36,5 percent compared to the same period in 2019.

Credit sales increased from 40 percent of total sales in the third quarter to 64 percent of total sales in the last quarter while at Jet, unit sales of 1,3 million were down 29 percent for the period to date against 2019.

“Cash and credit sales contribution to total sales were 55 percent and 45 percent respectively,” it said.

At Carousel, the group’s factory, a 32 percent increase in unit sales was recorded for the period under review.

“Total sales for the last quarter were lower than the third quarter as the factory operated for only a week in December,” said Edgars.

In the last quarter of the financial year under review, the group’s financial services entity reviewed customer credit limits upwards, leading to an increase in the gross debtors’ book from ZWL$123 million at the end of September to ZWL$428 million at the end of December trading period.

“Interest income grew 32 percent year-on-year in inflation adjusted terms in line with the growing debtors book.

“Having contained arrears and follow up costs, we shared the profits received from the growth in the book with our customers by reducing interest rates in December,” said the company.

“Active accounts firmed in response to the favourable credit terms, increasing to 41 percent of total number of accounts from 32,9 percent as at the third quarter.”

The group said it will be rolling out revised loyalty programmes to further improve customer engagement and retention.

On debtors collections, Edgars said the average collections were up to 36,1 percent of the opening book, compared to 34,7 percent in the third quarter and 24,5 percent last year. It said the quality of the book continued improving with “current’’ account balances at 88 percent, up from 78,2 percent compared to the third quarter.

The microfinance loan book increased six percent in inflation adjusted terms to ZWL$30,5 million as at end of December 31, 2020 trading period.

In historical terms, the book grew by 133 percent from ZWL$13,1 million at the end of the third quarter.

“Interest income grew 62 percent in inflation adjusted terms from third quarter on the basis of the bigger book written and interest rates,” said Edgars.

On the outlook, the group said the ongoing lockdown has denied business two months of normal trading, which has severely constrained prospects for the first quarter of 2021 financial year.

In light of the Covid-19 pandemic, the business has responded through online store sales and WhatsApp trading — although volumes remain relatively low.

“We have stepped up our efforts to ensure that our staff and customers remain safe under the second wave of Covid-19.

“Recent hikes in fuel price and Zinara (Zimbabwe National Road Administration) toll fees has set on increases in prices for other products, which will further increase the cost of doing business and limit customer demand,” said Edgars.

“Under these conditions, management’s focus is on cost containment and managing cashflows until the macro-economic conditions improve,” it said. —chronicle.cl.zw