eBusiness Weekly
Business Writer
Clothing manufacturing giant and retailer, Edgars Group, says trading in United States dollars and the introduction of the foreign currency auction system in June this year has brought considerable stability as the firm is now funding the importation of inputs and machinery to re-tool its operations.
“With improved access to foreign currency from sales and the foreign currency auction, retail chains can now improve on merchandise assortments,” said Edgars in a latest trading update.
The group, however, reported a subdued trading performance in the second quarter and six months ended July 5, 2020. During the period under review, Edgars chain unit sales of 273 193 were down 55,7 percent for the half year against the same period in 2019.
Credits sales declined in the second quarter, contributing only 25,1 percent of total sales compared to a contribution of 71,2 percent for the same period last year as management and customers took precaution on the level of credit exposure.
According to the trading update for the period, Edgars said the conditions carried over from the first quarter remain largely unchanged as impacted by an unstable macro-economic environment exacerbated by the effects of Covid-19.
“Sales were trending upwards since lockdown relaxation but have been hampered by shortened trading hours enacted by Government in July, as customers are unable to access our outlets on time,” said the group.
“Access to funding is constrained, mostly short term (a year or less) as liquidity tightens, with the cost of borrowings increasing on each renewal.”
Year to date turnover for the trading period under review declined 43 percent compared to the same period last year in hyperinflation adjusted terms. This was affected mainly by the Covid-19 induced lockdown, which saw all stores being closed in April.
“Units sold for the period to June declined from 1,6 million to 963 000 compared to the same period last year.
“Retail inventory as at the end of June 2020 declined seven percent further from March levels,” it said.
The company said it anticipates an extremely constrained consumer environment and therefore, the order book remains carefully managed with increased promotional activity anticipated to manage the current stock.
Borrowings at end of the quarter were $132,6 million of which $107,6 million is short term debt.
Finance costs increased compared to last year in line with increased interest rates and borrowings. Trade and other liabilities were 722 percent up on last year.
“Management’s focus is on e-commerce solutions to reduce disruptions caused by lockdowns on sales. Management are also applying strategies aimed at managing inventory, credit and expenses,” said Edgars.
“The credit landscape remains challenging under hyperinflationary conditions and management will apply its skills to mitigate the overall effect credit will have on inventory levels and sales.
“Offering credit to customers remains the mainstay for the Edgars chain’s performance thus credit management in this hyperinflationary environment is critical in order to preserve value and grow sales,” said the group.
At Jet chain, Edgars said customers continue to favour transacting in cash and thus cash sales contributed 91,1 percent and credit sales 8,9 percent of total sales for the second quarter.
The group’s factory, Carousel, during the period under review recorded a five percent increase in unit sales compared to 2019 spurred by production of face masks.
Carousel has also benefitted from the introduction of the foreign currency auction through access to foreign currency for the importation of fabric and machinery for retooling.
“Production of outerwear remains constrained by the weak demand of product at retail,” it said.
