Edgars’ old credit sales model under threat after tough half-year

Zimbabwe Edgars

Selling clothes on credit has long been the hallmark of Edgars stores, the country’s largest clothing retailer. But a turbulent first six months of the year threatens to upend the company’s traditional model.

Volumes at Edgars stores fell 55.7% in the first half of this year, partly due to a sharp fall in credit sales. A drop in disposable incomes and COVID-19 restrictions have hit retail businesses across the economy.

Credit sales fell in the second quarter of the year, and made up just 25.1% of total sales. This is compared to 71.2% of sales over the same period last year “as both management and customers took precaution on the level of credit exposure,” Edgars Limited says in its latest trade update.

“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,” the company says.

At the budget Jet chain, customers still prefer buying in cash. Cash sales accounted for 91.1% of sales while credit sales were just 8.9% of total sales for the second quarter. Unit sales were down 49%. The company hopes COVID-19 may weaken demand for second-hand clothes, which have hit Jet and other retailers.

“The chain anticipates that the second-hand clothing market will remain constrained due to COVID-19, further positioning Jet to capture market share,” Edgars reports.

Limited trading hours under the lockdown have hit sales and forced the company to go online to sell products and receive payments. This year, the company introduced shopping via WhatsApp.

“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.”

Edgars: Some good from bad

There was some good news under COVID-19; Edgars’ manufacturing arm, Carousel, seeing a 5% improvement in unit sales due to the production of face masks. The foreign currency auction system, which started in June, has increased forex access for the firm.

“Carousel has benefitted from the introduction of the foreign currency auction through access to foreign currency for importation of fabric and machinery for retooling. Production of outerwear remains constrained by the weak demand of product at retail.”

At the end of June, Edgars’ retail stock was down 7 % further from March. The company is looking to the auction to help it get a better variety of stock, but the outlook is still largely dim.

“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.”

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