Harare - The giant clothing retailer, Edgars Stores Limited, has alluded that the rampant inflation in Zimbabwe and exchange rate fluctuations have continued to weigh on operations.

The fluctuations have a significant impact on costs and revenues as valuations continue to vary from suppliers to customers.

Positively, the Group recorded a mild increase in sales volumes for the 52 weeks ending 9 January, 2022 reversing a decline in the preceding comparable year.

Sales volume were 4.5% higher than the previous year at 2.5 million units. Before COVID-19 took effect in 2019, Edgars sold 3.4 million units at its peak post-dollarization.

Performance was hampered by the loss in purchasing power and lockdowns brought on by COVID-19. By value, credit sales made up 61.2% of overall sales, up from 43.5% the year before.

This figure can illustrate how people tend to choose debt in an atmosphere of cheap interest rates and inflation.

Interest rates were raised by RBZ from 80% to 200% at benchmark levels in May 2022. Subsequently, the Central Bank put a halt to all bank lending activity, which affected credit sales models. This policy, however, was only temporary, despite its lasting negative effects.

Edgars Chain contributed 38% of the overall sales volumes, a mild increase from the previous year, and 69% of these were credit sales.

Only 45% of the transactions made by Jet Chain, which totaled 1.5 million, were credit sales which reflects a 13% increase in sales volume. Under the direction of the PAAB, the Group’s accounts were prepared in relation hyperinflation accounting (IAS 29).

Therefore, it was reliant on CPI data provided by state agency ZIMSTAT. Given the discrepancy between the auction market and the parallel prices offered by the majority of providers, the conclusions of the market exchange rate did not, however, correspond to IAS 21.

The Group’s inflation adjusted revenue increased by 82.5% to ZWL$6.9 billion, and profit before tax moved from a negative record to a positive ZWL$590 million, reversing a loss from the previous year.

The business claimed that part of its earnings were denominated in foreign currency.

The gearing for the corporation at the end of the period under review was 0.5, up from 0.3 in the previous year. The borrowed capital was allocated to expanding the stores and growing the debtor's book in a bid to cover the liquidity gap created by credit sales.

Edgars retained a foreign obligation of US$240 million, which it said it will be able to service from existing facilities.

Jet Stores count increased from 27 to 31, which is an addition of 4 stores in the year under review, whilst only 1 shop (Avondale) was opened within the Edgars Chain.

Stock cover levels remains stable at about 19.2 weeks for Edgars and 16 weeks for the Jet Chain. Active accounts increased from 120,000 to 128,000 in the period under review. The debtors book increased by 257% in line with inflation and a skew towards credit sales.

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