The Sunday Mail
Livingstone Marufu
THE country’s two major apparel retailers Edgars and Truworths, which recorded contrasting fortunes in the first half of the year, are still groaning from a tight environment where consumer spending continues to shrink. With a combined branch network of 111, the two concerns have a much more visible footprint around the country.
Edgars Stores Limited, which is 40 percent controlled by South African-based Edgars Consolidated Stores (Edcon), reported that its profit climbed 13 percent to $1,2 million in the six-month period ended June 30, 2015.
Of the two main units controlled by Edgars – Jet Stores and Carousel —the former was the main driver of the group’s profitability, as its contribution to group turnover rose to 27,7 percent from 18,8 percent from the same period a year earlier, driven by credit sales at some of the test stores.
Jet Stores is a successor brand of Express Mart and was launched in November 2011 as the retailer sought to diversify its product range.
To date, the division has more than 25 branches across Zimbabwe.
However, Carousel, the Bulawayo-based manufacturing division of Edgars Stores Limited that produces a wide range of denim, ladies wear and gents’ casual wear, had a subdued first-half performance.
Edgars chairman Mr Themba Sibanda told The Sunday Mail Business that sales were mainly being affected by waning consumer demand and increased job insecurities, especially after the July 17 Supreme Court ruling that allowed employers to terminate employment contracts on notice.
Merchandise sales, as a result, dropped 1 percent to US$29, 1 million from a year ago, while group sales tanked 11,2 percent from 2014.
“Fast declining economic fundamentals, combined with low disposable incomes and heightening job insecurity have undermined consumer confidence and demand. The strengthening United States Dollar vis a vis the Rand has brought to the fore the need to focus on cost containment.
“The Edgars Chain was not spared from the effects of the declining economy and the high base of 2014 when the 12 months to pay offering boosted turnover,” said Mr Sibanda.
Until mid-April 2015, Jet was offering credit only in test stores that were mostly in outlying centers.
The group intimated that it will embark on further cost-cutting measures in order to improve the performance of the retailer.
But its peer, Truworths, which is an affiliate of Truworths International and has 64 branches countrywide, reported a 95 percent slump in profit in the same period to US$49 370 from US$354 243 recorded in the first half of 2014.
Sales at Truworths-branded stores fell 16,8 percent, while sales at Topics and Number 1 stores — the group’s units — declined 16,9 percent and 28,9 percent, respectively.
On the overall, group retail sales crashed 18,6 percent to $10,8 million in the review period.
Truworths chief executive officer Mr Bekithemba Ndebele said the lower-margin goods ate into the company’s topline.
“The gross margin decreased from 51,7 percent in the prior period to 48,5 percent as a result of the introduction of the Homeware range which carries a lower margin,” said Mr Ndebele.
Last year, Truworths improved on its credit card offering by reducing the interest charge per month from 2 percent to 1,5 percent and reducing the service fee from 1,2 percent to 0,5 percent in order to be accommodative to customers.
Mr Ndebele expects the “retail trading conditions are expected to remain difficult” and efforts will also be made to manage costs.
