CLOTHING manufacturer and retailer, Edgars Group, says that trading in US dollars and the introduction of the foreign exchange auction system in June this year has created significant stability as the group now finances imports of inputs and machines to redevelop its operations.
“With improved access to foreign exchange from foreign exchange sales and auctions, retail chains can now be improved on product range,” Edgars said in a recent trade update.
However, the group reported a subdued trading trend in the second quarter and six months ended on 5 July 2020. During the period considered, sales of units in the Edgars chain were 273,193 down by 55.7 percent in the first half of the year compared to the same period in 2019. Credit sales fell in the second quarter and contributed only 25.1 percent of total sales compared to a contribution of 71.2 percent in the same period last year, when management and customers took precautions regarding credit exposure. According to the trade update for the period, Edgars said conditions transferred from the first quarter remain largely unchanged as affected by an unstable macroeconomic environment exacerbated by the effects of Covid-19.
“Sales are trending upwards since the closure, but have been hampered by shortened opening hours adopted by the government in July as customers were unable to access our stores on time,” the group said.
“Access to finance is limited, mostly in the short term (a year or less), as liquidity tightens, with the cost of borrowing increasing with each renewal.”
Year to date, for the period considered trading, 43 percent compared to the same period last year traded in hyperinflation-adjusted terms. This was mainly affected by Covid-19-induced closure, with all stores closed in April.
“Units sold in the period to June fell from 1.6 million to 963,000 compared to the same period last year.
“The retail inventory at the end of June 2020 fell seven percent further from March levels,” it said.
The company said it anticipates an extremely limited consumer environment and the order book therefore remains carefully managed with increased sales activity expected to control the current stock.
Loans at the end of the quarter amounted to $ 132.6 million to ZWL, of which ZWL $ 107.6 million is current liabilities.
Financing costs increased compared to last year in line with increased interest rates and loans. Trade and other liabilities increased 722 percent compared to last year.
“Management’s focus is on e-commerce solutions to reduce disruptions caused by sales shutdowns. Management also applies strategies to manage inventory, credit and expenses, ”said Edgars.
“The credit landscape remains challenging under hyperinflationary conditions, and management will use its skills to mitigate the overall effect that credit will have on inventory levels and sales.
“Offering credit to customers remains the mainstay of the Edgars chain’s performance, and therefore credit management in this hyperinflammatory environment is critical to maintaining value and increasing sales,” the group said.
At the Jet chain, Edgars said customers continue to favor cash transactions, with cash revenue contributing 91.1 percent and credit revenue 8.9 percent of total sales in Q2.
The Group’s plant, Carousel, recorded a five percent increase in unit sales during the period considered compared to 2019 spurred by the production of face masks.