Low disposable incomes constrain Edgars’ demand

CLOTHING retail chain, Edgars Stores Limited, says demand for its products and services has been constrained by low disposable incomes in the first quarter ended April 2021.

Despite the prevailing price stability following the launch of the foreign currency auction system last year in June, labour bodies have said most workers are earning salaries below the Poverty Datum Line, which cripples spending power.

Workers in both public and private sectors are as a result pressing for wage increases with the Government last week stressing the need for a study that will assist sector-based determination of salaries.

In a trading update for the first quarter ended 11 April 2021, Edgars said it was hopeful that the bumper harvest Zimbabwe has achieved this year would result in positive economic growth going forward.

“We count some positives such as the decline in borrowing costs over the last month and a good agricultural season, which we hope will result in positive economic growth,” said the company.

“The biggest constraint is low demand as a result of low disposable incomes of our customers in general.

“The percentage of disposable incomes spent by Zimbabweans on food is as high as 79 percent of total income, which crowds out discretionary spending on other needs such as clothing,” it said.

The retail chain said it will continue monitoring costs, cashflows and volumes under the prevailing rapidly changing business environment.

It said borrowings at the end of the trading period were ZWL$364 million up from ZWL$245 million in December 2020. The company did not have any material foreign-denominated debt at the end of the quarter.

The company managed to navigate its way with debtors’ collections improving to an average of 39,8 percent in the quarter under review.

During the period, the group projected credit losses would increase to 2,2 percent compared to 1,1 percent of the total debtors’ book as at the end of December 2020 trading period.

“Average collections were 39,8 percent of the total book compared to 36,1 percent in December 2020 and 34,7 percent in September 2020.

“The quality of the book was maintained over this difficult period with ‘current’ account balances at 85 percent (December 2020: 88 percent),” said the group.

The period under review was significantly affected by the Covid-19 lockdown as physical stores were closed for more than seven weeks of the 13 weeks in the quarter. However, online stores were open but recorded little business due to delivery constraints during lockdown.

“Normal trading resumed on 3 March 2021 bringing relief to our turnover and more importantly to our cashflows,” said Edgars.

“The debtors’ book collections kept the company going during lockdown as most of our credit customers paid their instalments on time.

“Lessons drawn from the 1st lockdown assisted the company in improving online payment platforms for our customers hence a significant increase in collections during the second lockdown compared to 2020 lockdown,” it said.

The company said it was able to honour its pressing obligations on time adding that access to foreign currency from sales, interbank markets and the Reserve Bank of Zimbabwe auction continues to improve although not enough to cover fabric and merchandise imports. —chronice.cl.zw