Edgars has a good first half

It’s not all bad news after all. Edgars Stores says consumer demand for the six months to 9 July was higher than anticipated and company sales increased by 306 percent compared to the same period last year.

It says falling inflation during most of 2004 allowed incomes to catch up with prices. In addition, the adjustment of income tax thresholds resulted in increased take-home pay for formal sector employees.

Inflation dropped from over 600 percent in January last year to a four-year low of 123.7 percent in March this year while the tax-free threshold was increased from $200 000 a month to $1 million a month.

But this trend is being reversed. Inflation stood at 265 percent in August and there were fears that it could rise further because of the recent increase in the price of fuel and the weakening Zimbabwe dollar.

Edgars says this is likely to push prices beyond the reach of the average customer. Coupled with this, overhead expense inflation could depress margins.

Edgars has three main trading divisions- its flagship, Edgars Stores which offers credit facilities, Express Stores its cash chain, and its manufacturing division Carousel.

Sales at Edgars grew by 313 percent though it faced serious challenges in keeping stocks of imported fabrics and finished goods such as cosmetics and toiletries.

The Express chain increased its sales by 316 percent but it faced stiff competition now prevailing in the middle to lower end of the market.

Carousel had a disappointing 113 percent growth largely due to the shortage of fabrics.

The company says Edgars was reasonably stocked at the end of June while Express was slightly under-stocked. Carousel had adequate fabrics though denim and twill fabric supplies remained a problem.

Performance in the second half was therefore likely to be adversely affected by the acute shortage of fabric and finished goods as the shortage of foreign currency intensified.

But while most companies which have released their results for June skipped dividends preferring to plough back their cash, Edgars said it was going to pay a dividend of $100 a share, because it had significant cash reserves.

It had cash and cash equivalents of $132 billion at the end of June compared to $58 billion at the end of December. The company normally declares a final dividend only.

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