Clothing retail giant Edgars lauds improved Zimbabqwe business environment

LISTED clothing retailer, Edgars Stores Limited, plans to launch online stores for its retail chains countrywide, taking advantage of the improved business operating environment and maximising on festive season sales.

In a trading update for the third quarter ended 4 October 2020, group chief executive officer, Ms Tjeludo Ndlovu, said the prevailing exchange rate stability and inflation slowdown have created an improved macro-economic climate for business growth.

This has seen the company cautiously extend more credit to customers, thereby increasing the number of traffic to the business. With the impact of Covid-19 lessening on business after the

Government eased lockdown restrictions on trading hours, Ms Ndlovu said business volumes have continued to recover.

“We expect the recovery observed in this quarter to continue into the fourth quarter if the macro-economic stability persists. We are launching online stores for the retail chains in time for the festive season trading period, complementing the pilot WhatsApp selling platform that is being offered in select stores,” said Ms Ndlovu.

“Historically, the last quarter significantly outperforms the first three and accordingly we look forward to a strong performance.

“Key to achieving this will be good Diaspora remittances and reduced new Covid-19 cases, which will allow free movement of people.”

Ms Ndlovu, however, said access to funding remained constrained due to market liquidity challenges, which saw the cost of borrowing spike by 10-15 percent over the quarter. During the period, the business experienced cost escalation in utilities, rentals and salaries, she said.

In terms of financial performance, Ms Ndlovu said trading for the period under review was down 36 percent in inflation adjusted terms and up 445 percent historically in the third quarter.

“Units sold for the year to date declined to 1,5 million from 2,5 million last year. Demand for the quarter also declined from 820 000 units last year to 585 000 units. Resultantly, inflation adjusted earnings before interest, taxes, depreciation and amortiSation (EBITDA), (a measure of a company’s operating profit as a percentage of its revenue) was down 20 percent compared to the same period last year,” said Ms Ndlovu.

“Borrowings at the end of September trading period were $115 million, most of which were short term. The group did not have any material foreign denominated debt at the end of the quarter, limiting exposure to foreign currency exchange losses.”

During the period the main Edgars chain unit sales were down 50 percent to 453 752 for the year against the same period in 2019. However, credit sales improved from 25 percent in the last quarter to 40 percent of total sales. Similarly, Jet chain unit sales of 771 893 were down 43 percent for the period to date against 2019 with cash sales contributing 88 percent while credit sales contributed 12 percent compared to 91 percent and nine percent respectively in the second quarter.

The group’s manufacturing unit, Carousel, realised 142,7 percent jump in unit sales largely driven by Covid-19 masks and the sister chains’ (Edgars and Jet) summer stocking programmes.