Edgars banks on festive season, after volume fall

Business Reporter

Clothing retailer Edgars Stores Limited says pressures on disposable incomes resulted in reduced retail volumes in the 26 weeks ended July 7, 2024, after total group units sold declined by 22,4 percent to 0,85 million compared to the same period last year.

Group chairman Mr Thembinkosi Sibanda, in a statement of the financials, said under the current economic circumstances, food security issues generally take precedence over clothing.

“As a result, total group revenue decline was contained at 15,4 percent over the prior half year at US$16,1 million against US$19 million in 2023,” he said.

Mr Sibanda said during the period under review, the business pursued aggressive margin enhancements through better procurement, increasing internal manufacturing volumes at Carousel.

“Enhanced cost containment efforts as well as complementary initiatives saw our stores get fresher and high-quality stock availability, notwithstanding a challenging supply chain environment,” he said.

Edgars migrated its listing from the Zimbabwe Stock Exchange (ZSE) to the Victoria Falls Stock Exchange (VFEX) effective 5th of April 2024.

In the period under review, group profit before tax increased 169,6 percent over the half year to US$0,16 million compared to a loss of US$0,23 million.

Mr Sibanda said the group makes most of its profit in the last half of the year during the festive season.

In terms of retail performance, total retail merchandise revenue amounted to US$13,2 million, representing a 12,8 percent decline over the prior half year.

ZiG credit sales contributed 93,1 percent to ZiG sales, while the US dollar credit sales contributed 73 percent of total US dollar sales.

The Edgars chain recorded turnover of US$8,3 million, down 5,3 percent from the prior half year, and units sold were down 15,37 percent from 0,44 million.

ZiG credit sales contributed 73 percent of ZiG sales, while US dollar credit sales contributed 71 percent of USD sales.

Total sales for the Jet chain were US$6.2 million, down 17 percent from US$7 million achieved in the prior half year, while units sold decreased by 18,69 percent from 0,58 million.

ZiG credit sales contribute 95,2 percent to total ZiG sales, while US dollar credit sales contribute 73 percent of total US dollar sales.

In the financial services segment, the US dollar retail debtors’ book closed the half year at US$10,4 million, representing a 25,3 percent growth on the prior half year, whilst the ZiG retail debtors’ book closed the half year at ZIG$7,5 million, a 1154,3 percent increase on the prior half year.

Mr Sibanda said the skew reflects the growing dollarisation in the market and the impact of high ZiG interest rates, discouraging borrowings in local currency.

“Active USD accounts increased to 82 000, up from 77 000 in the prior half year, and the increase came on the back of new account opening initiatives as well as account conversion initiatives,” he said.

Mr Sibanda said the asset quality remained strong at 77 percent for the US dollar book and at 78,4 percent for the ZiG book.

However, he noted that expected credit losses (ECLs) as of June 7, 2024 were 3,2 percent of the book compared to 4 percent as of 8 January 2023, which is well within the acceptable industry benchmark of 5 percent.

Club Plus Microfinance closed the first half of the year with a healthy asset quality of 91 percent loan book.

Mr Sibanda said the focus for the period was to grow the US dollar loan book, focusing on less risky loan products.

“Despite the liquidity challenges in the market, the business accessed funding, which aided its growth.” For the period under review, the business closed the loan book at US$822 000.

“Significant growth is expected in the last half of the year following additional funding injected and business development initiatives being pursued,” he said.

Carousel Manufacturing, in keeping with the strategy to increase supply chain control and improve margins, input volume from the manufacturing division attributing to group sales increased by 95 percent, from 67,9 thousand units in the prior half year to 132,6 thousand units.

Manufacturing turnover increased from US$852 thousand to US$1,49 million.

“Production efficiencies continue to improve on the back of an increased order book and the recruitment of experienced, qualified machinists,” said Mr Sibanda.

He noted that the group invested US$1 million in expanding production capacity during the period, mostly towards semi-automated machines, automated pocket machines, surface printers, boiler replacement, embroidery machines, fuser machines, and an enhanced cutting room solution.

“Management will further retool Carousel to underpin increased production and improve operational efficiencies to better support the retail chains,” he said.
Mr Sibanda also said the group sought to expand its geographic footprint through the opening of new stores in strategic locations.

He said in fulfilment of this drive, the group opened a new Edgars store at Ascot Shopping Centre in Bulawayo in March 2024 and a new Jet Store in Harare at Hogerty Hill Mall.

“To date, three Express Stores aimed at servicing the low-income segment of the market have been opened, selling only for cash. A further five are in the pipeline before the close of the year,” he said.

Mr Sibanda said smart merchandise procurement and optimal inventory planning remained key focus areas to ensure an optimal merchandise cycle that yields targeted margins without compromising the merchandise quality.