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Edgars' profits hit by Zim's informal sector

Harare – Growing competition from low priced clothing and apparel merchandise being fuelled by Zimbabwe’s rapidly growing informal sector contributed to Edgars Zimbabwe’s 9.7% profit decline for the half year period ended July 5 this year.
 
South Africa's Edcon, which controls about 39% in the Zimbabwe unit, is boosting its presence in African markets outside of South Africa. Edgars Zimbabwe did not declare a dividend for the period as it is now focusing on “improving” the “customers' shopping experience through providing more value and wider choice”.  

However, trading conditions had improved since April and management is now expecting to see “positive bottom line growth for the (full) year” period, the company said in a statement. The Zimbabwean unit posted an after tax profit of $4.2m for the full year period to January.

Profit before tax for the half year period was $1.6 million.
 
Zimbabwe is battling a worsening crisis that has forced the economy into deflation in the past five months. This has also been worsened by a liquidity crisis that the country is facing and which has forced the rapid growth of an informal sector that the government is now trying to milk for revenue through the imposition of taxes and levies on vendors and other informal traders.
 
Edgars Zimbabwe has now been caught up in the pricing competition being posed by the informal sector, which sources most of its apparel from South Africa, China, Botswana and Tanzania. Some of the apparel is made up of pre-used clothing that is shipped as aid from western nations and which is being shipped to Zimbabwe through Mozambique.
 
"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 underway and we expect a turnaround for the chain in the last quarter," Edgars Zimbabwe chairperson, Themba Sibanda said on Wednesday.
 
The company also operates the Jet store network, which contributed 18.8% to overall turnover for the period. There are now 25 Jet outlets compared to 18 shops in 2013. Turnover in the Jet Stores segment quickened 12.3% during the half year period.
 
“July trading was more buoyant and both profitability and old store growth rates improved. Concerted efforts to improve pricing and product assortment are underway and we expect a turnaround for the chain in the last quarter,” said Sibanda.
 
The 9.7% profit decline that Edgars Zimbabwe recorded during the half year period was despite massive capital investment for the period of $768 608. The company said this had mostly been spend on the opening of four new stores ($585 115) as well as the upgrading of ICT software and other equipment.

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