Edgars turns over a new leaf in the clothing book!

Edgars Stores Limited, a significant clothing retail player, seems to have cracked the puzzle. The Victoria Falls Stock Exchange (VFEX) listed clothing manufacturer and retailer, Edgars told analysts recently that it has turned on a new leaf in its clothing operations.

The informalisation in the country, which the Zimbabwe National Chamber of Commerce estimates to be at 64.1% has been the biggest threat to the formal retail market in Zimbabwe.

The formal food retailing sector faces an existential threat whilst the retail clothing sector hasn’t been spared, in fact, it is one of the most vulnerable given the decreasing middle class and the proliferation of second-hand clothes.

However, Edgars Stores Limited, a significant clothing retail player, seems to have cracked the puzzle.

The Victoria Falls Stock Exchange (VFEX) listed clothing manufacturer and retailer, Edgars told analysts recently that it has turned on a new leaf in its clothing operations.

Beginning the financial year 2023 the company has taken several strategic initiatives which marked the start of its transformation.

Key to these strategic initiatives will be a clear brand differentiation amongst the several markets that the company serves.

Edgars Stores has predominantly served the middle to upper-class end of the market under its brands Edgars chain and Jet chain, but that market has lost much ground due to competition from cheaper alternatives.

The Jet Chain entered the Zimbabwean market in 2011 replacing the Express Mart outlets.

Edgars has recently announced that it will be going head-on with boutiques and second-hand clothes retailers via the relaunch of the Express Stores. They are targeting to open 10 new express stores this year.

Edgars told analysts that they have already gathered data on their clients’ fits and sizes and are confident that they can provide them new and quality clothes, with a dignified shopping experience that can compete with the informal clothes retailers. 

The broad strategy of the express store is anchored on a wide assortment of clothes under what they are calling the “dress the family” concept.

Management of Edgars' explained that pricing will be key to the success of the express stores and a target of a US$10 basket size cap is being thrown around. 

These price points also make these stores cash-only shops, just like the informal market and would be sprinkled across the country, even in other places where the other Edgars would ordinarily have not played like growth points.

To compete with the flea markets, Edgars will employ various forms of shops including the traditional brick and motor shops, but also use online shops and utilise the shop inside a shop concept.

Edgars now has a new anchor shareholder in the form of Sub-Saharan Capital Group (SSCG), which is also an investor in Metro Peech and Browne, and there is a high probability that the shop inside a shop concept will be in partnership with Metro.

The biggest fears and concerns were that Edgars’ war with the informal clothing retail sector might cannibalise the other Edgars brands, but the management was quick to dismiss those concerns and reassure analysts that there would be clear brand separation.

The Edgars chain will continue to leverage its high-quality, exclusivity and high customer in-store experience whilst the Jet chain competes on value for money.

The new leaf in Edgars’ book also speaks to the rejuvenated Carousel division, which is the manufacturing arm of the company.

Edgars reported that it has embarked on a retooling exercise to increase its capacity and has also started employing the best candidates in that space, even from competitors.

Production levels at Carousel have significantly improved from 7,000 units per month around 2022 to the levels of 30, 000 units per month and management is bullish that the 100, 000 units per month are attainable given the capital expenditure and have already started thinking about exporting to other markets like South Africa in the future.

The Edgars’ story wouldn’t be complete without looking at its Debtor’s book, which the company prides itself on having, one of the credit management systems that can compete with some of the best banks in the land.

With almost all of their credit sales being foreign currency denominated, the company has a US$12.6 million book which has grown by 99% in the current financial year under review despite active accounts only seeing a 2% growth.

Overall comment

The hand of the SSCG in Edgars is becoming quite apparent as the company turns a new leaf.

The change in senior management is one of the clear steps that is critical to the company’s transformation and the move to the VFEX aligns with the moves that we have seen from other companies with links to this shareholder.

However, more important than migrating to the VFEX is the move to get to the informal market, where the money is a signature of other companies that are associated with the shareholder and these companies have managed to create significant value for their shareholders.

The Club Plus division is also a critical component of the business not only because of its revenue generation but also because it drives sales to the Edgars and Jet Chains due to the credit sales.

The source-based payroll deduction lending products are also assisting this division in reducing its credit losses, which makes the division attractive.

Despite Edgars’ strategy and vision, it doesn’t necessarily mean that all their problems are now behind them. In my opinion, the war with second-hand clothes retailers is more deep-rooted and there are chances that Edgars could be underestimating the power of its competitors in that space.

I am of the view that the company focuses more on the chains where it has a clear and absolute advantage than fighting the lower end of the market.

Overall this is a critical part in Edgars’ journey and one that existing and potential shareholders need to critically look at and make a decision to either follow the vision or exit their positions.

  • Hozheri is an investment analyst with an interest in sharing opinions on capital markets performance, the economy and international trade, among other areas. He holds a B. Com in Finance and is progressing well with the CFA programme. — 0784 707 653 and Rufaro Hozheri is his username for all social media platforms.

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