HARARE: Clothing retailer Edgars Stores has recorded a 13% jump in after-tax profit to $1,2 million for the 26 weeks to July driven by the group’s extended credit repayment facility and various promotions introduced to stimulate consumer spending.
Revenue grew by 1% to $30 million for the period under review due to fast-declining economic fundamentals, combined with low disposable incomes and heightening job insecurity that have undermined consumer confidence and demand.
“The strengthening United States dollar vis-a-vis the rand has brought to the fore the need to focus on cost containment,” the company said in a statement accompanying the results yesterday.
In retail operations, the group said it was not spared from the effects of the declining economy and the high base of 2014 when the 12 months to pay offering boosted turnover.
As expected from the test carried out in 2014, the company said there was some loss of market to Jet as some cash-strapped customers favoured the value offerings of the discount chain.
Sales decreased by 11,2% from 2014 and profitability decreased to 8% of sales from 17% prior year. The company said the Jet’s contribution to group turnover increased to 27,1% from 18,8% same period in 2014, with an increase of 43% over 2014.
“This was achieved through the granting of credit facilities to customers throughout the chain. Until mid-April, Jet was offering credit only in test stores that were mostly in outlying centres. The success of this chain was built on credit and benefits of scale,” the company said.
The group said growth in debtors continued to be well managed. Total trade debtors were $29,8 million, net of an allowance for doubtful debtors of 6%. Recoveries averaged 28,7% of bad debtors handed over compared to 32,6% in the prior year.
Factory sales decreased by 3% and profitability reduced to $61 000 from the $176 000 achieved last year. The unit has embarked on a productivity improvement exercise and a modest export programme is being developed, the group said. Gross borrowings grew on the expanded debtors’ book and were $23,2 million at the half year compared to $16,7 million in 2014.
“We anticipate that gearing will be maintained at the current level of around 1:1 throughout the year. Net of interest bearing debtors gearing remained at zero,” it said.
Capital expenditure for the period under review was $1,4million. The group said its information technology upgrade project was anticipated to take longer than initially planned.
“Significant cost savings will be realised after implementation as a result of increased efficiency and availability of information for improved decision-making,” the company. Going forward, the group plans to, among other measures, apply tighter cost control and focusing on streamlining business process and improving efficiencies.
