Business / Companies
Heavily indebted customers negatively affecting the retail sector
14 Mar 2013 at 06:02hrs | Views
Debtors management performed very well - Masterson
Edgars Limited MD Linda Masterson told an analyst briefing yesterday that low disposable income in the market and heavily indebted customers are negatively affecting the retail sector including the group.
"Almost every formally-employed Zimbabwean is heavily indebted and the reason for that is our bankers are lending money to formally employed people and they are lending amounts that are forcing employers to break the law…," she said.
Commenting on borrowings, Masterson said the borrowing costs as percentage of revenue were at 5.4% in 2011, 4.3% in 2012 and 2.5% in 2013.
"Looking at credit management, this is the area I'm most pleased with, our debtors management performed very well throughout the year… the number of accounts is growing and the trend will continue," added Masterson.
Under the Edgars Chain Debtors average collections by the company were at 23%. Average past dues went up to 17% from the previous 16%.
The number of accounts increased by 14.3% and the group's current ratio "improved dramatically by 92.5% to 2.56."
Masterson also noted that there is strong competition for credit customers in the supply of retail and financial services.
"The transporters' strike in South Africa last year affected product price and availability. Christmas again was disappointing but not as disappointing as the one in 2011. Additional December public holidays and late or non-payment of bonuses affected Christmas trading," said Masterson.
The retail sales of the group went 17.8% up at $60.1 million whilst the trading profit increased by 6.5% to $7.9 million.
"As you know, Jet is growing at a faster pace than Edgars…it has more room for growth," she added.
The group also opened a new Edgars store in Bulawayo in December 2012, increasing the number of outlets to 24.
"It cost us a fortune but it is without regret."
On costs she said occupancy costs increased by 24% and "we've to get that figure down."
"Inflation is at 2.5% and you want a 24% increase. It doesn't work like that," she said as she took a swipe at "greedy" property owners.
There was an 18% increase in turnover from $52.9 million in 2011 to $62.5 million in 2012 and according to Masterson this was mainly due to finalisation of rebranding Express Stores to Jet and the opening of more outlets.
As indicated by Masterson, turnover contribution by Jet increased from 14% recorded in the prior period to 17% for the 52 weeks ended 5 January 2013. Edgars' contribution decreased from 81% to 76% whilst Carousel's went up from 5% to 7%.
Looking at the turnover split, Masterson indicated that credit sales went down from 76% in 2011 to 73% in 2012.
"But as a percentage Edgars credit sales went up from 87% the previous year to 92% in 2012," she noted.
On cash sales, Jet cash sales went up to 19% from 11% whilst Edgars cash sales went down to 8% from 13%.
Masterson mentioned that both Jet and Edgars performed well in the Southern region of the country and that there is "a lot that needs to be done in the Northern region since there is growth opportunities in that region."
In merchandise procurement Masterson said; "We do support local industry, we will always support local industry. You never know when you might be forced to support local industry."
As indicated by Masterson, the group purchases more than 60% of its products from local suppliers.
On Carousel, the group has introduced a new range of "interesting" men's casual wear which customers will be seeing in the stores "going forward but the full range will only be available in the second half."
She also noted that the group is the "biggest cellphone seller in the country by far."
Masterson said this year the group is targeting a 46% gross margin, turnover of between $65million-$67million, trading profit above 15% of turnover, finance costs below 2.5% of turnover and profit after tax between $4.4million-$4.7million.
Commenting on the manufacturing sectors in Zimbabwe, Masterson said; "We have to change our mindsets on manufacturing…policies and labour laws should be more business friendly."
"Almost every formally-employed Zimbabwean is heavily indebted and the reason for that is our bankers are lending money to formally employed people and they are lending amounts that are forcing employers to break the law…," she said.
Commenting on borrowings, Masterson said the borrowing costs as percentage of revenue were at 5.4% in 2011, 4.3% in 2012 and 2.5% in 2013.
"Looking at credit management, this is the area I'm most pleased with, our debtors management performed very well throughout the year… the number of accounts is growing and the trend will continue," added Masterson.
Under the Edgars Chain Debtors average collections by the company were at 23%. Average past dues went up to 17% from the previous 16%.
The number of accounts increased by 14.3% and the group's current ratio "improved dramatically by 92.5% to 2.56."
Masterson also noted that there is strong competition for credit customers in the supply of retail and financial services.
"The transporters' strike in South Africa last year affected product price and availability. Christmas again was disappointing but not as disappointing as the one in 2011. Additional December public holidays and late or non-payment of bonuses affected Christmas trading," said Masterson.
The retail sales of the group went 17.8% up at $60.1 million whilst the trading profit increased by 6.5% to $7.9 million.
"As you know, Jet is growing at a faster pace than Edgars…it has more room for growth," she added.
The group also opened a new Edgars store in Bulawayo in December 2012, increasing the number of outlets to 24.
"It cost us a fortune but it is without regret."
On costs she said occupancy costs increased by 24% and "we've to get that figure down."
"Inflation is at 2.5% and you want a 24% increase. It doesn't work like that," she said as she took a swipe at "greedy" property owners.
There was an 18% increase in turnover from $52.9 million in 2011 to $62.5 million in 2012 and according to Masterson this was mainly due to finalisation of rebranding Express Stores to Jet and the opening of more outlets.
As indicated by Masterson, turnover contribution by Jet increased from 14% recorded in the prior period to 17% for the 52 weeks ended 5 January 2013. Edgars' contribution decreased from 81% to 76% whilst Carousel's went up from 5% to 7%.
Looking at the turnover split, Masterson indicated that credit sales went down from 76% in 2011 to 73% in 2012.
"But as a percentage Edgars credit sales went up from 87% the previous year to 92% in 2012," she noted.
On cash sales, Jet cash sales went up to 19% from 11% whilst Edgars cash sales went down to 8% from 13%.
Masterson mentioned that both Jet and Edgars performed well in the Southern region of the country and that there is "a lot that needs to be done in the Northern region since there is growth opportunities in that region."
In merchandise procurement Masterson said; "We do support local industry, we will always support local industry. You never know when you might be forced to support local industry."
As indicated by Masterson, the group purchases more than 60% of its products from local suppliers.
On Carousel, the group has introduced a new range of "interesting" men's casual wear which customers will be seeing in the stores "going forward but the full range will only be available in the second half."
She also noted that the group is the "biggest cellphone seller in the country by far."
Masterson said this year the group is targeting a 46% gross margin, turnover of between $65million-$67million, trading profit above 15% of turnover, finance costs below 2.5% of turnover and profit after tax between $4.4million-$4.7million.
Commenting on the manufacturing sectors in Zimbabwe, Masterson said; "We have to change our mindsets on manufacturing…policies and labour laws should be more business friendly."
Source - zfn
