Edgars have just released a 1Q17 trading update which both confirm and highlight the state of the business at this time.
Sales fell -8.1% to R6 billion.
Cash sales fell -2.7% and credit sales fell by -15.6%.
Gross profit margin decreased to 36%.
Management is blaming the following for the shocking results….
1. Restructuring taking a lot of managements time.
2. Supply interruptions.
3. Reduction in office staff.
4. Late onset of winter.
5. Timing of Easter.
This indicates just how far off reality the executive team is if it believes the above five issues were responsible for producing this set of results. The first three reasons are self inflicted and therefore could have been avoided. The last two reasons would have had the same impact on all retailers with both reasons having a marginal impact on overall results.
The hard facts say to me, less customers are shopping and buying from Edgars especially its own account base who are closing accounts at an alarming rate. That is why cash sales are down -2.7% and credit sales down -15.6%. The product range is too expensive and not on trend resulting in the business having to take extra markdown to clear the merchandise, hence the reduced margin.
The business has started to sell off its chains, but rather that getting rid of CNA or Boardmans which are a drag on the overall company results, they have sold Legit to Retailability for R637m. I would say Legit is one of the better chains positioned in the lower price segment, and possibly the chain with the most potential. Anyway it’s difficult to understand what the Edgars strategy is as they continue to take decisions completely different to what you would expect.
Edgars also say they want to re-list in three to four years time. Good luck to them, it is certainly a share I won’t be buying.
enjoy your shopping.