Tawanda Karombo Harare
EDGARS Zimbabwe’s interim profit had declined by 9.7 percent, hit by the country’s increasingly informalised economy, the clothing firm said yesterday.
Edcon, which holds a stake of almost 40 percent in Edgars Zimbabwe, is expanding its presence in the rest of Africa, a strategy that several other South African companies have adopted to tap into the opportunities other regional markets are offering. In the year to January, Edgars Zimbabwe made a profit of $4.2 million (R46m).
Themba Sibanda, the chairman at Edgars Zimbabwe, said yesterday that profits for the interim period to July 5 had declined by 9.7 percent to $1.6m. He attributed this to intensifying competition from clothing sold in the fast-growing informal sector.
“The chain has been seriously affected by price-based competition from the informal sector and unbalanced assortments arising from the rapid expansion last year. Concerted efforts to improve pricing and product assortment are under way and we expect a turnaround for the chain in the last quarter,” Sibanda said.
Linda Masterson, the managing director for Edgars Zimbabwe, said in March that the current trading year would be turbulent.
However, Sibanda said trading conditions had started to improve since the start of April, and he added that the company anticipated a steady performance in the second half.
July trading in the Edgars-branded stores and the Jet stores were strong as “cost control efforts started bearing fruit resulting in improved profitability”. Growth in the old stores quickened in July after the group opened four new stores.
The group’s combined debtors book had 203 728 accounts at the end of June compared with the 188 447 accounts that the company had last year. It said 71.3 percent of these were active, slightly below the 72.5 percent active accounts for the same period last year.
“Our provision for doubtful debts of $517 020 represents 2.3 percent of gross balances. We are confident of the adequacy of our provision for doubtful debts,” Sibanda said.
Edgars Zimbabwe spent total of $768 608, of which $585 115 was on new stores during the period, as well as additional money on software and upgrading other equipment. This pushed up the capital expenditure for the period to $768 608.
Masterson previously said that the company was geared to put “greater leverage” on partners for sourcing merchandise. This would broaden the company’s product and category offering, leading to “greater desirability of assortments”.
Groups in Zimbabwe’s textile and clothing industry have struggled in recent months, shedding as many as 27 000 jobs. Data show the industry now employs only 4 000 workers, while capacity use in the industry has sagged to below 20 percent.
“Our biggest challenge is that duties are not being collected [from informal traders] as they should at the boarders, which create an unlevel playing field. We need an improvement on the supply chain, the cost of doing business and import tariffs,” Jeremy Youmans, the chairman of the Zimbabwe Clothing Manufacturers Association, said.