Edgars to expand online, branch network

LISTED clothing retailer, Edgars Stores Limited says it will expand its online, brick and mortar branch network in order to build resilience to withstand the impact of future shocks and disruptions.

The company, in a trading statement for the 13 weeks period ended 10 October 2021 (third quarter), said the impact of the Covid-19 pandemic curtailed foot traffic into stores while consumer spending was significantly depressed.

"The business is alive to opportunities presented to expand both our brick and mortar and online footprint and develop a resilient business model that will withstand the impact of future shocks and disruptions," Ms Tjeludo Ndlovu, the group's chief executive said.

Ms Ndlovu said that during the reporting period, the company lost sales, productive time and pressure to settle fixed operating costs including Covid-19 related expenses for the Group.

"Consumer confidence and spending were significantly depressed, resulting in year-to-date turnover falling below forecast by the end of September 2021," she said.

The group CEO said the company is taking steps to exercise rigorous management of inventory levels, closely monitoring all aspects of the trade receivables portfolio and optimising funding mix to meet the needs of the business.

According to the trading update, group cumulative units sold were 1,6 million as at end of the third quarter, which was 15,5 percent ahead of last year while revenue and EBITDA for the quarter were $1,29 billion from the second quarter's $1,08 billion and $411 million compared to previous quarter's $329 million respectively.

"Gross profit margin declined from 63 percent to 46 percent in historical terms compared to the same period last year due to price inelasticity, rising input costs as well as the need for discounting and promotions in order to stimulate sales," Ms Ndlovu said.

She noted that as at the end of September, borrowings were $906 million compared to $725 million at the end of the second quarter, with the average cost of borrowing remaining largely unchanged.

She added that the group had US$190,000 in foreign liabilities which it is able to service from existing resources.

During the period under review, the group opened two new stores, Jet Mutoko and Jet Hwange which are said to be profitable to date.

In terms of individual business unit performance, Edgars chain unit sales of 243,311 were up 14,7 percent from the second quarter.

Ms Ndlovu said credit sales constituted 72,5 percent of total sales compared to 68,1 percent for the second quarter and the chain closed September with stock cover of 12,5 weeks from 19,6 weeks.

At Jet Chain, unit sales of 391,356 were up 15,6 percent from the second quarter while credit sales made up 48,6 percent of the total sales for the quarter compared to 46,5 percent at the end of the second quarter.

"The chain closed September with a stock cover of 11,15 weeks compared to 10,52 weeks in 2020."

The group's financial services finance income was up 21,9 percent in Q3 relative to Q2 on the back of a growing debtors book which increased from $582 million in Q2 to $814 million in Q3.

Ms Ndlovu said the debtors book performance remained healthy, with 87,5 percent of the book being current compared to 86,3 percent in Quarter 2.

"Active accounts at 37,8 percent have been stable throughout the year but increased relative to prior year while collections remained positive at 32,9 percent of the book compared to 36,7 percent in the second quarter," she said.

Carousel Manufacturing unit sales increased by 47,4 percent to 46,484 from 31,537 recorded in the second quarter.

Ms Ndlovu said management continues to explore export markets for opportunities offered by the COMESA registration received by the factory.

The group's Micro Finance loan book principal value increased by 41,8 percent to $101million compared to Q2.

Interest income was up 34,9 percent from Q2 and 82,1 percent of the book was current at the end of the period compared to 86,2 percent at the end of Q2.