LISTED clothing retail chain, Edgars Stores Limited is set to launch online stores for its outlets ahead of the festive season, as part of efforts to drive volumes up, after being disrupted by Covid-19, group chief executive officer Tjeludo Ndlovu has said.
The group operates Edgars and Jet chains.In a trading update for the third quarter ended October 4, 2020, Ndlovu said year-to-date turnover declined 36% in inflation adjusted terms.
She said units sold declined to 1,5 million during the period, from 2,5 million last year.
Resultantly, inflation-adjusted earnings before interest, taxes, depreciation and amortisation declined by 20% compared to the same period last year.Borrowings at the end of September trading period were ZW$115 million (US$1,5 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, Ndlovu said.
“The macroeconomic operating environment improved this quarter as characterised by exchange rate stability and slowing inflation. As a result, the company cautiously extended more credit to customers thereby increasing the number of feet in our stores,” Ndlovu said.
“We expect the recovery observed in this quarter to continue into Q4 if the macroeconomic stability persists. 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.”
“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 currently being offered in select stores. Management will continue to monitor costs and Covid-19 risk to business operations,” she said.
Unit sales at Edgars chain declined by 50% to 453 752 for the year to date against the same period last year, whereas credit sales improved from 25% in the last quarter to 40% of total sales.
Overall, credit sales remained well short of the historical contribution to total sales of 70% to 75%.
Carousel manufacturing unit sales, however, were up 142,7% driven by Covid-19 masks in general and by the chain’s summer stocking programmes.
On the financial services side, the company reviewed limits for customers with a good credit record upwards resulting in debtors growing from $64 million (about US$790 000) at the end of June to ZW$123 million (about US$1,5 million) at the end of September.
Civil servants continued to be a key customer segment constituting 34% of active accounts.Interest income grew 22% year-on-year in infl¬ation adjusted terms in line with interest rate adjustments.
“Active accounts deteriorated progressively from an average of 40,7% of total number of accounts during the first quarter to 32,9% as at the close of September trading month. This trend will reverse in Q4 as more account holders utilise their credit for Christmas shopping,” she said.
The group’s micro-finance loan book declined 70% in inflation-adjusted terms to ZW$13,1 million (about US$160 000) as at end of September.
In historical terms, the book grew by 84% from ZW$7,1 million (about US$86 000) at the end of the second quarter.
“This was achieved in spite of low school fee loan disbursements obtaining as schools remained closed. The demand for loans is high, but the unit is constrained by funding challenges. The company has diversified its product offering to reduce concentration risk of school fee loans,” Ndlovu said.
Interest income declined 66% in in¬flation-adjusted terms. Edgars said access to funding remained constrained due to market liquidity challenges.
For instance, it said, the cost of borrowing increased by between 10% and 15% over the quarter.The business also experienced cost escalation in utilities, rentals and salaries.