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Business Writer

LISTED clothing retailer and manufacturer, Edgars Stores Limited, says it is remodeling its business to tap into new opportunities while focusing on cost containment to ensure the long-term viability of the business as the group eyes expanding its geographic footprint. 

Despite the challenges in the operating environment, the company is optimistic that recovery will be premised on improved access to foreign currency through domestic sales to cover import requirements, a stable exchange rate, and slower inflation. 

In a statement accompanying financial results for the full year ended January 8, 2023, group chairman, Mr Thembinkosi Sibanda, said the dividend could not be declared during the period to allow business recovery.

“Management continues to remodel the business to capitalise on opportunities that arise in the very uncertain operating environment,” he said. 

 

“Cost containment remains a focus area so as to ensure the long-term viability of the business. The group seeks to expand its geographic footprint through the opening of new stores in strategic locations.

“We will continue to transform our customer experience through updating our stores to world-class standards, offering widened merchandise ranges at affordable prices and flexible credit terms,” said Mr Sibanda. 

On financial performance (based on inflation-adjusted results), the chairman said despite the challenges in the operating environment, the group managed to close the period with improved performance over the year. 

The group reported revenue of $35,9 billion, which is 51,7 percent up from that achieved in 2022 of $23,7 billion.

“The growth in real terms is attributed to volume recovery, replacement cost-based pricing, ongoing cost management as well as initiatives implemented by management to ensure fresher stock availability in our stores, regardless of the supply chain challenges. 

“Profit before tax of $1 billion was a decline of 5,7 percent from the prior period of $2 billion. Profit for the year was weighed down by higher finance costs emanating from the revision of the minimum lending rates to 200 percent as promulgated by the Reserve Bank of Zimbabwe.

“The result was the finance costs of $4 billion, a growth of 117 percent on the prior year of $1 billion,” he said. 

“The business was not able to recover these costs from our customers. Unlike Fast Moving Consumer Goods (FMCG), with specialty retail that Edgars is in, merchandise has to be ordered and paid for six months before it is received.

“Further to that, merchandise is then sold on a six-month basis, and clearly interest rates as alluded to above are not suitable for this type of business.” 

During the period under review, total group units sold increased by 13,1 percent from 2,4 million to 2,7 million compared to the same period last year.

“Trading in foreign currency since April 2020 has allowed our retail chains to improve stock assortments, which in turn has increased traffic in our stores.

“While a sizable portion of our cash sales are in foreign currency, we believe that this proportion can be increased through favorable and consistent application of regulatory policies around trading in foreign currency,” he said. 

 

At the end of the reporting period, the company had US$134 000 foreign liabilities, which it will be able to service from existing resources. 

The group’s manufacturing division, Carousel, recorded a turnover of $2,4 billion up 102 percent over prior year. Total units sold were down 12,66 percent to 141 000 (2022:161k) while revenue was adversely affected by depressed sales in the retail space. 

Management pursued alternative markets mostly in the local corporate wear sector and beyond our
borders, which resulted in an increase in sales contribution from the open market that accounted for 39 percent of total sales.