Edgars posts 114% jump in after-tax profit

EDGARS Stores Limited posted a 114% increase in after-tax profit to US$8,5 million in the year ended January 6, 2019 due to improved margins in the last quarter of the period.

“Profit for the period of $8,5 million was 114% higher than the prior year $3,98 million, partly due to increased margins in the last quarter. Group margins improved to 46% (2017:43%),” Edgars chairman Thembinkosi Sibanda, said in a statement accompanying the company’s financial results.

Driving the margins for the period, despite Edgars operating under the weight of a badly performing economy was the retail clothing firm maintaining good trades during the first nine months of the year under review.

On Wednesday, Edgars managing director Linda Masterson told analysts the company aims to increase exports to 15% of revenues this year from the 5% posted last year.

She said the group is targeting 40%growth in profit after tax and a 35% turnover growth this year.

Edgars chain profit to sales ratio increased to 27% from 24% in 2017. Turnover increased 16% to US$45,7 million out of 25 stores from a 2017 comparative of US$39,6 million despite units sold for the year decreasing by 16%.

Jet chain profit to sales ratio increased by 23% in the period under review from 21% in 2017. Total sales grew by 27% to US$30,5 million from a 2017 comparative of US$24,1 million, despite units sold being down 8% to US$2,3 million from US$2,5 million in 2017.

While production was somewhat “erratic” due to suppliers not being able to source inputs on the back of foreign currency shortages, Edgars grew its revenue by 22% to US$78,1 million from the comparative 2017 figure of US$64,1 million.

“Mark-up action to protect stock-outs was necessitated in October when fears of a return to hyperinflation left customers frantically seeking value. Our prices did not go up by as much as some but still had the effect of dampening demand and reducing volumes,” Sibanda said.

“Foreign currency shortages necessitated an import substitution programme which, through the efforts of our sourcing teams, was largely successful.”

Fears of a return to hyperinflation saw customers seeking value necessitated mark-up action to protect stock-outs and prices slightly increasing which boosted revenues, he added.

The strategies paid off as basic earnings per share more than doubled to 3,29 cents from a 2017 comparative of 1,54 indicating the company managed to churn out a profit for shareholders.

In terms of liquidity, Edgars has a current ratio of 2,99 showing that for every dollar, the company more than doubled its cover.

This should prove crucial as the company increased its total borrowings to $8,3 million in the period under review from $4,7 million in the comparative 2017 year as a result of store revamps, shorter supplier credit terms for merchandise inputs and micro finance growth.

However, expenses also rose by 9% to US$12,5 million from a comparative of US$11,47 million in the 2017 period.

Sibanda said in the short term, the company looks forward to customer incomes being assisted by salary increases and in the long term fiscal discipline as well as reforms delivering foreign investment and job creation.

He added that the company planned to increase its efforts in working with local suppliers.

“We will intensify our efforts in working with local suppliers to develop and improve the quality, fashion and, importantly, on-time-delivery of wanted products,” he noted.

Two Kadoma stores, which were under lease, were destroyed by fire in November and efforts to reinstate both operations were under way.