HARARE, March 22 (The Source) – Clothing retail chain Edgars Stores’ net profit dropped nearly 90 percent to $548,000 from $4,57 million after a 19 percent drop in sales.
Merchandise sales were $50,3 million for the year to January 8, 2017 compared to $62,3 million last year as a result of depressed consumer demand.
Chairman Themba Sibanda said although collections continued to show strength, stock movement challenges faced in the transition period from the old system to its new Enterprise Resource Planning (ERP) platform also affected performance.
Group margins were down three percent on prior year due to aggressive markdowns in 2016, the impact of product mix and deliberate right pricing. Cash flows from operating activities was at $10,2 million.
Once-off costs of approximately $2,5 million emanating from retrenchment and ERP, and the fall in sales impacted on total comprehensive income which went down to $500,000 from $4,6 million in 2015.
Costs were lower than 2015 level by $4 million as the group focused on cost cutting measures in the year. The group repaid loans of $6,8 million, reducing borrowings to $11,2 million.
It did not declared a dividend.
On operations, Edgars Chain total sales were $32,2 million, compared to $42,7 million in 2015 while sale per square metre also declined 24 percent to $1,462 from $1,921 in prior year from 27 operating stores. Stock cover at year-end was 16.7 weeks lower than 20.2 weeks in 2015.
Jet Chain debtors were at $4,4 million compared to $4,9 million in prior year after an allowance for credit losses of $400,000. From 24 stores, sales per square meter were at $1,990 while stock cover for the year was 8.7 weeks.
Edgars debtors owed $18,7 million, a reduction from $28 million in 2015 after an allowance of $1,8 million. Net write offs for the period averaged 7.9 percent of lagged credit sales and 0.8 percent of lagged debtors.
Its manufacturing arm made a trading loss of $400,000 because of reduced demand from group retail operations.
“In addition, production is being affected by the limited allocation of foreign currency to the productive sector and efforts to secure export orders are continuing,” said Sibanda in a statement.
Loan repayments in the year amounted to $6,8 million thus reducing borrowings to $11,2 million from $18 million in 2015.
The group will also revamp its network of stores around the country
“Its around $1,5 million that we have in our budget to revamp the stores,” managing director Linda Masterson later told The Source on the sidelines of the analyst briefing.
For 2017, Masterson said the company has targetted a 400 percent increase in profit after tax and five percent increase in turnover.