Oliver Kazunga, Senior Business Reporter
LISTED clothing retail group, Edgars Stores Limited, says the impact of Covid-19-induced lockdowns on trading has necessitated an increase in borrowings as businesses sought to service ongoing commitments.
This has seen the company incurring foreign liabilities amounting to US$190 000 as at the end of June 2021, which it hopes to service using existing resources.
In an abridged financial statement for the six months period ended July 11, 2021, which was published yesterday, the company said the extended lockdown measures adopted to contain the spread of the deadly pandemic have had adverse effects on business operations.
In that regard, Edgars said the increased borrowings were being offered at an average interest rate of 44,4 percent per annum from 43 percent last year, which is rather steep for many businesses.
“At the end of June, the company had US$190 000 in foreign currency liabilities, which it is able to service from existing resources,” said Edgars.
“The impact of lockdowns on trading was such that it necessitated the increase in borrowings in order for the business to service on-going commitments such as occupancy and utility costs, as well as ensuring that our employees were remunerated on time.”
While the Government and private sector were working together to stem the Covid-19 challenge, Edgars said the long-term effects of the pandemic were difficult to predict.
“It is hoped that the ongoing Covid-19 vaccination programme being spearheaded by the Government will result in the achievement of herd immunity thereby making it unnecessary for Government to resort to lockdowns in the future.
“Since the relaxing of lockdowns, trading in the chains has seen significant improvement with an increase in customer footfall. We hope that this momentum will be maintained going forward,” said the group.
During the period under review, the company said cumulative units sold totalled 945 000 as at the end of the second quarter, which was two percent below last year’s 963 000 units.
Edgars chain’s unit sales of 344 249 were down six percent from last year’s 366 720. Credit sales for the chain constituted 68,1 percent of total sales compared to 64,7 percent for the first quarter.
At Jet Stores, the group said sales of 526 691 were up by one percent against last year’s figure of 523 034 with credit sales made up of 46,5 percent of the total sales up from 40,9 percent at the end of the first quarter.
During the period under review, the group’s gross profit margin improved from 42 percent to 46 percent in inflation adjusted terms compared to the same period last year. This was driven by fresh inventory assortments and increased imports.
Edgars manufacturing unit, Carousel recorded a sales decline of 74 021 during the period under review from 121 093 units in 2020 resulting in lower efficiencies relative to last year.
“The factory secured its first quarter export sales to the region in this quarter and management continues exploring export markets for more opportunities,” said the company.
The group’s finance income was up 249 percent year-on-year and 6,6 percent up in the second quarter relative to first quarter. This was despite the fact that interest rates were reviewed downwards over the period.
“The debtors book increased from $519 million in June 2020 to $639 million in June 2021. The book performance remains healthy, with 86,3 percent (2020: 67,4 percent) of book being current, compared to 84,9 percent in first quarter,” said Edgars.
“Active accounts at 37,4 percent, while stable throughout the year, declined relative to prior year (June 2020: 44,6 percent). Collections were good at 36,7 percent of the book, compared to 39,8 percent in first quarter.” – @KazungaOliver