Wendy Hall

Consumer Industries Reporter

FASHION retailer Edgars Consolidated (Edcon) reported a 22% increase in headline earnings to 287c a share and a 20% increase in retail sales to R16,3bn in the financial year to end March, in spite of a shorter trading period.

Edcon said the past financial year consisted of one trading week less than the previous year, which had a 4% negative effect on the results. The dilutionary effect of a staff empowerment transaction had also had a negative effect of about 5% on the final results, Edcon said.

The group's gross profit margin had declined to 38,6%, from 39,8%, as a result of the higher growth in sales of lower-margin products and cellphones, sales that increased 49% to R1,7bn for the period.

Group services CE Mark Bower said the category had continued to grow faster than any other business that the group was running.

The department-store division, which includes Edgars, Boardmans, Prato, CNA and Temptations, had grown sales 18% during the period. The Edgars chain had grown 18% and CNA 23%.

Bower said that although CNA was not "firing on every cylinder, it is starting to do what we expected it to do". Edgars had improved its stock-turn to 5,7 times from the previous year's 5,3 times.

The discount division, which includes Jet and JetMart, had grown turnover 21%. Profit in the credit and financial services division had increased 19% to R252m.

Cost of credit had risen to R158m from R51m, which the group said was due to the annual net bad-debt write-off to debtors reaching 8,3%.

Edcon had increased its active account base by about 585000 customers, by bringing its account customer base up to 4,1-million. Net bad debt was up to R351m from R184m.

Bower said the group was opening more accounts in the discount division than in the department store division, which reflected SA's demographics. "They (discount division customers) are the new emerging customer and are a higher debt risk in the short term," he said.

Cash sales accounted for 37% of total sales, consistent with last year.

Edcon's manufacturing division recorded a loss of R1m, an improvement on the R4m loss incurred in the previous financial year.

Total group expenses for the year increased 11%, which included the cost of

175 new stores opened during the year and the associated corporate costs.

Edcon CEO Steve Ross said the group planned to add a further 6%-8% of trading space in the 2008 financial year, after which new store openings "will start tapering off".

Edcon is confident about the prospects for the coming financial year, and says expansion in the economy should continue to support retail sales growth, albeit at a slower pace. With Reuters