The Sunday Mail
MARKET watchers believe credit sales could drive Edgars Stores Limited’s performance next year, but profits are expected to be dented by higher finance costs. Brokerage firm IH Securities forecasts that the clothing retailer’s revenue will climb 16 percent to US$59,5 million in the full year to 2015, with credit sales accounting for 91 percent (US$54 million) of the business, a 2 percent increase on 2014 figures.
In the last two years, Edgars has opened four new stores as part of its expansion, bringing the total number of outlets to 28.
Edgars management says they “are now happy with their footprint and will be taking a much more conservative approach to future capacity expansion”.
That reduces the likelihood of new store openings next year.
Therefore, said IH Securities, “the rapid capacity expansion which has been driving sales over the last three years can no longer be relied upon”.
Analysts expect some sales uplift coming through after the retailer in April extended its account payment period from six to 12 months for customers.
The retailer said in its half-year financials to July 5, 2005 it has already witnessed an increase in sales via the new dispensation.
However, Edgars says it will need to secure US$6 million to finance the 12-month tenure schemes during the 2015 financial year, a development that will push finance costs 17 percent higher and drag net income by 12 percent to US$3,7 million.
Group revenue is estimated to rise 15 percent to US$77,6 million on lower margins due to pricing inflexibility and increased debt collection costs.
Cash sales at Jet Stores have remained depressed, likely due to poor product offerings and IH Securities does not expect these circumstances to change much in 2015.
Jet Stores revenue has, therefore, been guided to rise just 2 percent to US$14,1 million.
Zimbabwean clothing retailers are struggling to grow sales due to weak consumer demand. Consumers have become highly conservative in their spending owing to low disposal incomes. Another listed clothing concern, Truworths Ltd’s, which owns Topics and Number 1 Stores, will be publishing its full-year 2014 financials soon, and these are similarly expected to reflect falling demand and declining margins.
Truworths’ interim results to January 5, 2014 indicated that retail revenues fell 0,04 percent.
Sales at both Truworths and Topics were helped by the introduction of a new in-store credit card that pushed average spend to US$220 from US$176 prior year comparative.
However, provision for doubtful debts rose to 7,3 percent from 4,7 percent last year as the weakening economy and low incomes impacted negatively on the quality of the debtors book.
Sales may pick up during the festive season when people tend to spend more, analysts said.
