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Oliver Kazunga, Senior Business Reporter
LISTED clothing giant Edgars Stores Limited has resolved to direct its focus on cost reduction initiatives after its profits dropped to $4 million for the year ended January 9, 2016.

During the comparable period last year, Edgars posted a $5,2 million profit.

Edgars chairman Themba Sibanda said in an audited financial statement for the period that the group performed relatively well given the sharp decline in the operating environment and economy at large.

“The group was not entirely spared, and saw a marked reduction in consumer confidence reflecting in turnover, which trend became more pronounced in the fourth quarter following retrenchments,” said Sibanda.

“Delayed payment of workers resulted in Christmas trading being extremely subdued and sales in that quarter were 23 percent below prior year… Profit for the period reduced to $4 million.”

He said the drop in the group’s turnover was mainly attributed to a drop in Edgars’ chain sales, which were down 24 percent from 2014.

This, Sibanda said, was from a high base of extended credit having been launched in the previous year and so they expected reduced turnover.

“The Jet chain’s turnover increased by 23 percent to $19,1 million (2014:$15,6 million) contributing 31 percent to consolidated group turnover (2014:22 percent).

“Profitability in the chain also improved to 7,5 percent of sales (2014:4,3 percent) on the back of credit and the benefits of scale,” he said.

Sibanda said due to poor Christmas trading, the chains ended the year overstocked, a situation which is now being addressed and has improved since year end.”

On credit management, Sibanda said despite the deterioration in disposable incomes, customers have been paying although not as timely as in the past.

“Total gross write offs for the year amounted to $2,2 million…at year end, total trade debtors were $$31,1 million net of provisions for doubtful debt of six percent (2014:2 percent),” he said.

Sibanda said as a result of being highly dependent on group retail, factory production sales decreased by 10 percent.

“It’s through exports, where volumes are larger, that the factory will hopefully realise meaningful productivity,” said Sibanda.

“Unfortunately, the combination of a high cost base and the strengthening United States dollar lead to exports being uncompetitively priced. The unit is continuing with its productivity improvement exercise and measures to right size are being implemented.”

During the period under review, Edgars capital expenditure clocked $2,1 million and the resources were spent on information technology, factory plant and equipment, among others.

“We don’t forecast an improvement in the short-term but are gearing the organisation for a learner, and more productive future, by remaining committed to reducing costs and increasing productivity.

“There’ll be some business re-organisation costs  in achieving this, which will impact 2016 profit but ensure that we’re well placed for 2017 and beyond,” he said.