- Unit sales declined by 26% to 505 531
- Edgars Chain unit sales eased by 23% to 186 179
- Jet Chain unit sales nosedived by 27% to 283 877
Harare- Leading clothing retail outlet, Edgars Zimbabwe Limited has introduced United States dollars (US$) credit sales for its customers as it battles to survive the aggressive monetary measures introduced by the government which depressed overall Group performance.
In a trading update for the third quarter ended 9 October 2022, the Group said policies implemented by the government to curtail inflationary pressures and restore currency confidence were a double edged sword as they both ensured some form of stability while also curtailing the consumer spending behaviours and investment levels.
Government hiked repo rates to 200% this year, a global record high while continuing to tighten the quarterly reserve money to below 5%. These made productive borrowing expensive while making ZWL liquidity scarce.
“The depreciation of the local currency and the high interest rates dampened consumption and investment levels resulting in our customers cutting on ZWL purchases negatively affecting our sales growth,” the Group said in a trading update.
“The Company introduced USD credit in response to this decline in ZWL demand.”
Unit sales declined by 26% to 505,531 from 681,191 recorded in 2021. However, cumulative units sold jumped by 10% to 1.78 million at end of the reviewed period benefiting from strong demand in first half of the year which also had a lower prior year base due to lockdowns.
Borrowings were marginally up at US$$700k and ZW$3.01 billion compared to ZW$2.02 billion in 2021 with the average cost of borrowing at 166.19% per annum compared to 55.46% per annum in June 2022.
“The Group had US$113,226 in foreign liabilities which it is able to service from existing resources.”
Edgars Chain unit sales eased by 23% to 186,179 largely on account of reduced aggregate demand following a sharp increase in minimum lending rates (MLR) announced in early July while revenue declined by 38% relative to the second quarter.
Due to currency depreciation, credit sales continued faltering by constituting 45.6% of totals sales compared to 60.2% for the second quarter. The chain closed September with stock cover of 16.5 weeks from 2021’s 12.5 weeks.
Jet Chain unit sales nosedived by 27% to 283,877 while its revenue for the quarter decelerated by 26% compared to the second quarter.
Credit sales made up 37.6% of the total sales for the quarter compared to 52.75% at the end of June with stock cover closed ahead at 11.88 weeks from 11.15 weeks in 2021.
The Group opened Jet Norton towards the end of the quarter and reiterated that performance of the store was top-notch underpinned by promotional activities that took place during the quarter.
Meanwhile, finance Income grew by 91% to ZWL$2.44 billion from ZWL$1.28 billion in Q2 triggered by a growing debtors’ book which increased from ZW$2.86 billion in Quarter 2 to ZW$3.04 billion in Quarter 3 attributable to the upward interest rate review.
“The recently introduced USD book closed the quarter at USD$1.99 million, the Group said.
Carousel Manufacturing Unit sales for the quarter were down 24% at 35,475 from 46,524 while year to date unit sales declined by 13% to 104,405 from 120,545 due to the weaker aggregate demand from the retail chains in response to the reduced appetite for credit.
Micro Finance The ZWL loan book decreased by 10% to ZW$236.85million from ZWL$262.27million at Quarter 2 while the USD loan book closed at USD$302k as at September 2022.
“The company expects the operating environment to remain challenging and complex in the face of difficult choices on economic policy, rising global inflation and high local inflation.”
“As we focus on business continuity, we are taking steps to exercise rigorous management of inventory levels, closely monitor all aspects of the trade receivables portfolio and optimising our funding mix to meet the needs of the business.”
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