Credit Crunch Chokes Edgars

A constrained credit market yielded negative outcomes for retail giant, Edgars Stores limited after the Group failed to access adequate financing to retool its machinery and prop input volumes for production during the 2020 second quarter ended July 5.

It was a difficult quarter, also characterized by shorter working hours due to lockdown measures imposed by the government.

In its latest trading update released this morning, the Group said the cost of borrowing increased significantly as a result of low market liquidity but the introduction of the foreign currency auction system later in the quarter is expected to overturn challenges in accessing foreign currency.

“Access to funding is constrained, mostly short term (a year or less) as liquidity tightens, with the cost of borrowings increasing on each renewal. Selling in United States dollars and the introduction of the foreign currency auction has brought some stability as the Group can now fund importation of inputs and machinery to retool its operations,

“Borrowings at end of the quarter were ZWL$132.6 million of which ZWL$107.6 million is short term debt. Finance costs increased compared to last year in line with increased interest rates and borrowings. Trade and other liabilities were 722% up on last year,” the Group said.

Most companies have struggled to stay afloat since the pandemic started as finance remains constrained

In May, the government announced a ZWL$ 18 billion bailout package to sustain businesses during the pandemic but analysts say the interest rate of 20 percent is too high for a business rescue purposes hence the low uptake.

However, the Group said the situation was compounded by the lockdown restrictions which led to shorter operating hours.

Retail inventory for the quarter declined 7 percent further from March levels.

“Year to date turnover for the trading period to 5 July 2020 declined 43% compared to the same period last year in hyperinflation adjusted terms, affected mainly by the COVID-19 induced lockdown which saw all stores closed in April,” the Group said.

With improved access to foreign currency from sales and the foreign currency auction, retail chains can now improve on merchandise assortments the company said.

The Group also intends to focus on E-commerce solutions to reduce disruptions caused by lockdowns on sales going forward.

Check Also

Covid-19 Bugged Chinhoyi High Sends Sos As Residents Urged Vigilance

HARD-HIT by a shocking 57 pupils that have tested positive for Covid-19, Chinhoyi High School …

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.

This function has been disabled for Zimbabwe Today.