INDUSTRIAL retail giant Edgars is reportedly closing 19 of its 55 branches and 220 employees are set to lose their jobs as the clothing retail giant
faces serious viability problems directly attributable to government’s disastrous price blitz.
businessdigest has established that Edgars will be closing down five of its branches in Bulawayo, Gweru, Chitungwiza, Highglen and Gwanda.
Edgars will also close 14 of its Express shops in Harare, Bulawayo, Marondera, Rusape, Chitungwiza, Bindura, Chegutu, Chiredzi, Plumtree, Gokwe, Karoi, Mutare, and Kwekwe.
Edgars’ branch roll out of 55 is divided into 27 Edgars Stores, 21 Express Stores and seven ExpressMart stores.
Edgars’ officials this week said the reduction of prices had created an artificial increased demand. They said the company had found itself in a precarious position where it was restocking at much higher prices only to be forced to sell at low prices in line with government’s June 18 directive.
“In June, the Minister of Industry and International Trade announced new measures to monitor and control the price of all goods and services in the country. All this was done through the press making it impossible to guess what precise action business was required to take. It was only on July 6 2007, after several arrests, that Statutory Instrument 142 of 2007 (SI 142) was published in the Government Gazette,” said Edgars in its 2007 Interim results.
The group said SI 142 had negative effects on retail companies and said they had already communicated to government the problems they were faced with owing to SI 142.
“SI 142 as being applied currently, has huge ramifications for the future of formal retailing in Zimbabwe. The current restrictions make it difficult to run a formal retail business. We have communicated to the authorities the various problems that are being encountered,” Edgars added.
As a result, Edgars’ stock levels went down to just four weeks cover instead of the usual 10 to 12 weeks cover by the end of July.
Coupled with a current serious debt mortgaging exercise affecting 42,4 % of its balance sheet through short term borrowing of $132 billion, the company’s long term prospects appear very bleak.
Edgars is currently shouldering high finance costs of between 550% and 600% which are obtaining in the market and these have posed a very serious threat to both its short and long-term profitability.
The company incurred finance costs amounting to $62 billion for the interim period ending June 30.
Repeated efforts to get in touch with Edgars’ managing director, Raymond Mlotshwa were fruitless with his office saying he had been called to South Africa by parent company Edcon to chart the way forward.
However Edgars insiders said some of the branches would be closed permanently while others would re-open when the situation normalised. It was not immediately clear which branches had been earmarked for permanent shut down.
“The idea generally was to streamline the group and reduce the number of Express shops so that we concentrate on the Edgars line,” a source within the company said.
They added that the recent move by the government to increase all goods by 20% was inadequate and could not warrant the group’s continued survival.
“Government is saying, all goods have to be increased by 20%, It is not feasible, as it cannot cover costs such as transportation and other expenses incurred in running the business,” the source said.
Edgars recorded a historical $245,5 billion turnover, registering an increase of 9 510%. However, unit sales fell by 26% during the same period.
The Edgars chain grew by 8 798% while Express inclusive of Expressmart increased sales by 9 595%. Unit sales in Edgars fell by 35% whereas units sold in Express including Expressmart fell by 13%.
Earnings for the period rose by 68 165 to $74,5 billion. Interest played a significant part on profitability and the financing expense of $61,9billion was 12 756% higher than the same period last year.