ZIMBABWE Stock Exchange-listed clothing concern, Edgars’ revenue dipped 43% in the second quarter ended July 5, 2020 compared to the same period last year, after the COVID-19-induced lockdown weighed down on its business.
BY FIDELITY MHLANGA
The company’s chief executive Tjeludo Ndlovu in a trading update for the quarter said group performance waned following the closure of business in April after authorities imposed a national lockdown to contain the spread of COVID-19.
“Year to date turnover for the trading period to 5 July 2020 declined 43% compared to the same period last year in hyperinflation adjusted terms, affected mainly by the COVID-19-induced lockdown which saw all stores 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,” Ndlovu said. During the quarter, inflation-adjusted earnings before interest, taxes, depreciation and amortisation was down 22% compared to the same period last year with retail inventory as at the end of June 2020 declining 7% further from March levels.
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% up on last year.
“With improved access to foreign currency from sales and the foreign currency auction, retail chains can now improve on merchandise assortments. The group anticipates an extremely constrained consumer environment and therefore, the order book remains carefully-managed and increased promotional activity is anticipated to manage the current stock,” Ndlovu said. Edgars Chain Unit sales of 273 193 were down 55,7% for the half year against the same period in 2019.
Credit sales declined in the second quarter, contributing only 25,1% of total sales compared to 71,2% for the same period last year as both management and customers took precaution on the level of credit exposure.
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“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,” Ndlovu said.
For the Jet Chain, cash sales contributed 91,1% and credit sales 8,9% of total sales for the second quarter. The chain anticipates that the second-hand clothing market will remain constrained due to COVID-19, further positioning Jet to capture market share. Unit sales were down 46% for the period to date against 2019.
The company’s Carousel manufacturing unit sales were up 5% for the period to date compared to 2019 spurred by production of face masks.
Carousel has benefited from the introduction of the foreign currency auction system to access foreign currency for importation of fabric and machinery for retooling. Production of outwear remains constrained by the weak demand for the product at retail.
The financial services segment has a combination of curtailed credit offering, restricted approval criteria and a conservative customer credit appetite which saw credit retail turnover contracting by 29% for the second quarter ended July 5, 2020 compared to the same period in the previous financial year.
Resultantly, the debtors book was down to $64 million as at end of June 2020 trading compared to a peak of $109 million as at the end of March 2020 trading month.
Interest income grew 53% year-on-year in inflation adjusted terms in response to increased funding and operating costs with active accounts deteriorating from an average of 50,5% of total number of accounts during the first quarter to 40,7% as at the close of June trading month.
Debtors collections were above expectation, strong in the months of May and June as customers began account payments in stores as well as improved customer education on electronic and other alternative payment channels availed to them.
Average monthly collections for the second quarter were 28,1% compared to 23,3% last year.
The quality of the book was badly affected during March and April due to COVID-19 lockdown, resulting in increased expected credit loss provision for the quarter. In March 2020, the “current” debtors book was at its lowest at 55,6% of the total debtors and 44% being in arrears, compared to 72% and 28%, respectively as at the end of June trading period.
The microfinance loan book declined 92% in inflation adjusted terms to $7,1 million as at end of June trading compared to same period last year. Disbursements were very low during the period, affected by schools’ closure and management is exploring alternative sources of business to grow the book.
“As at end of April trading month, the arrears book was 58,8% and 30-day plus arrears (PAR>30) book was 29,8% of the loan book. The book has since improved significantly with total arrears now at 22,1% and PAR>30 at 9,2% of the loan book as at the end of June trading period. Interest income declined 64% in inflation adjusted terms (159% growth historically) from last year,”
The rights issue to raise $70 million closed on August 21, 2020, after an extension necessitated by the unexpected closure of the Zimbabwe Stock Exchange. Almost all shareholders took up shares on offer.
Last year, Edcon disposed of its 41% stake in Edgars Zimbabwe through its wholly-owned investment vehicle, Bellfield Limited to Mauritius-based company, SSCG Africa Holdings. The clothing retail giant has 25 stores countrywide. It also owns 28 Jet Stores and Carousel garment manufacturing factory in Bulawayo.
