January 14, 2005

By Dirk De Vynck

Cape Town - Listed clothing retailer Edgars Consolidated Stores (Edcon) reported yesterday that sales in the third quarter to December had risen by 24 percent year on year and gross profit by 26 percent, and that the group was still on track to increasing its headline earnings a share for the year to March by about 60 percent.

The company's share price responded positively to the data, increasing by R12.10 to close at R283.10. The general retailers index gained 1.12 percent.

Edcon said the favourable retail environment, supported by low interest rates, real wage growth and higher consumer confidence, extended into the period under review.

Group sales for the month of December were 32 percent higher than the previous year, which suggested a gain in further market share.

The Edgars chain of stores, which contributed 49 percent to group sales, lifted turnover by 22 percent, while having in-house deflation of 2 percent.

The Jet chain, with 39 percent of group sales, contributed a stunning performance, with sales jumping 28 percent.

What made this performance more special was that it was achieved in an environment where sale prices, on average, declined by 20 percent.

This implies the volume of units sold increased by 48 percent and by 42 percent on a comparable stores basis, which excludes growth in average trading space of 6 percent.

Sales at CNA and Jet Mart increased by 5 percent and 1 percent respectively.

Although Edcon gave no specifics on Boardmans' performance, it said sales were within targets.

CNA was acquired in October 2002, while Boardmans was bought early last year.

The debtors book remained in a sound condition, with strong collections recorded during the quarter.

"At the December billing, 89 percent of the debtors book was current and able to buy, versus 88 percent in December the previous year."

Stock turns also improved further - to 5.6 times at Edgars and 8.8 times at Jet.

Edcon said its merchandise was current and that markdown requirements in the next three months should be well within planned levels.

Neill Young, an investment analyst at Coronation Fund Managers, said the trading statement was almost bang on line with the forecast it made.

"Jet was a bit above forecast, while CNA and Jet Mart were slightly disappointing."

On the trading updates from retailers released so far this year, Young said all of them were more or less in line with what he had expected.

Other than Edcon, Woolworths, Massmart, Truworths, Shoprite, Lewis and building material retailer Cashbuild have released updates since the beginning of the year.