KINGSTONE ZIMUNYA
HARARE – Listed clothing retailer and manufacturer, Edgars Stores Limited recorded double-digit sales growth in the third quarter of 2023, driven largely by the impressive performance of its manufacturing division.
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In a trading update for the nine months to October 8, 2023, Edgars Group CEO, Sevious Mushosho, said the economic environment was relatively stable in the period under review, after the intervention of the Central Bank and Government to stabilise the USDZWL exchange rate, and curtail inflation.
While liquidity continued to be a challenge as most banks struggled to fulfil drawdown requests, the announcement that the multi-currency regime will continue until 2030 restored confidence in the financial market and improved the situation towards the end of the quarter. Going into Q4, Mushosho expects this trend to continue.
The statement reads, “The group did exceptionally well during the third quarter achieving unit sales of 649,788 which was 28.5% up from the same period last year which had 505,531.
“However, cumulatively for the nine months to 08 October, the unit sales were 2.4% below last year due to the currency instability experienced in the second quarter which saw customers losing a significant part of their buying power especially the civil servants who are 35% of our business.”
Edgars growth in clientele despite a challenging economic environment has been bolstered by the performance of its manufacturing division—Carousel Manufacturing. The Bulawayo manufacturer achieved unit sales growth of 54,6% for the nine months to 8 October 2023. Cumulatively, unit sales were up 17.6% to 122,789 (2022: 104,405).
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“This was achieved through giving focus to local production to achieve exclusivity and high quality. There are plans to acquire more machines including a laser cutter to improve efficiencies, increase production capacity and reduce cost of production,” said Mushosho.
He said at the end of 30 September, the factory had enough stocks of raw materials to meet the increased demand from the chains, while orders for more fabric were placed to cover twelve months of production for all the product ranges.
He also revealed that there were plans to produce for the South African market in the coming year.
According to Mushosho, the Edgars Chain achieved unit sales of 260,043 representing a growth of 39,7% on prior year. Revenue for the nine months was up 43.99% relative to the same period last year in historical terms. Credit sales constituted 63% of total sales compared to 54% in the same period last year. The chain closed September with a stock cover of 10.0 weeks (2022: 17.3 weeks).
As for the Jet chain, third quarter unit sales were 334,910, an increase of 18% over the 283,877 units sold in the same period last year. However, he said the cumulatively for the nine months to 8 October, the Chain unit sales were 4,10 percent down on prior year as in 2023 they were 918,616 against 957,900 in 2022.
Nonetheless, revenue for the nine months was up 47.98% on prior year. Credit sales made up 60% of the total sales for the quarter compared to 49% in the same period last year. Stock cover closed at 10.6 weeks (2022: 12.46 weeks).
In Financial Services, he said in historical cost terms, finance income decreased by 32,80% (ZWL$12,42 bn) in the nine months relative to prior year same period (ZWL$18,48 bn).
The ZWL$ book reduced to ZWL$2.67 bn from a December 2022 balance of ZWL$2.85bn, while the US$ book grew 50.0% on the December 2022 balance to close at US$9.5m.
He said the debtors book performance remained healthy, with 80.6% of the ZWL$ book being current compared to 72.4% in September 2022 and 61.5% in December 2022 while 82.2% of the US$ book was current at the close of the quarter down from 90.4% as at December 2022.
In micro finance, the USD loan book closed the quarter at US$1.14m up 3.6% on December 2022 balance of US$1.1m while the ZWL$ loan book decreased by 92.1% to ZWL$22.60m from ZWL$285.55m in December 2022. The United States dollar book was 75% in current at the end of the period, compared to 82.1% at end of December 2022.
Mr Mushosho also highlighted Edgars' borrowings which market marginal increases in both ZWL and USD terms. He added that in spite the high cost of borrowing, the group was well positioned to service these borrowings.
“As at October 8, the Group’s borrowings closed at US$5.4m up from US$4.9m in Q2 and ZWL$3bn compared to ZWL$3.4bn as at end of the second quarter, with the average cost of borrowing for ZWL$ at 107.99% per annum compared to 89.35% per annum in June 2023 while the US$ average cost of borrowing was 13.39%.
“The group had US$125,456 in foreign liabilities which it can service from existing resources,” Mushosho said.
Going forward, Mr Mushosho said: “The Group expects the operating environment to remain stable for the remaining part of the year, creating opportunities for the business to grow further. We will continue to look at our business model and review it, to adapt to changes taking place in the economy.”
He said they were very confident that their turnaround initiatives are paying dividends as their operating results continue to improve each month with gross profit per unit going up while cost per unit is declining.
As we approach 2024, the Group continues on its drive to expand both their brick and mortar and online footprint, as well as develop a resilient business model that will withstand the impact of any future shocks and disruption.
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