Listed South African retailer Edgars Consolidated Stores (Edcon) has reported a 28% rise in diluted headline earnings per share to 109 cents for the six months to the end of September 2005, versus 85 cents in the year-earlier period.
The company declared an interim dividend of 62 cents per share, a 27% increase on the 49 cents declared at the halfway point in 2004, in line with its policy of maintaining a dividend cover of two times attributable earnings.
Edcon’s businesses incorporate the chains Edgars, Jet, Jet Mart, Legit, Boardmans, CNA and Boardmans, among others.
The group pointed out that its 28% growth in headline earnings per share included 26 weeks of activity, compared with 27 weeks a year earlier. On a comparable basis, its earnings increase would have been 40%, after accounting for the 5% dilution resulting from the group’s staff-empowerment transaction unveiled in June.
Also, Edcon’s prior-year results were restated using the new International Financial Reporting Standards.
“These results continue to confirm the sustainability of our customer-centric strategy,” said Edcon CEO Steve Ross. “It is particularly gratifying that, in addition to benefiting from the strong consumer environment, Edcon has once again reported growth ahead of the overall market. This is evidenced by our market share for the six months which, according to the Retailers’ Liaison Committee, increased to 31% from 29,5% a year ago.”
Edcon recorded retail sales growth of 22% year-on-year, with revenue totalling R7,35-billion from R6-billion a year earlier. Sales growth on a comparable-week basis was 27%.
Trading profit rose by 32% to R780-million from R589-million a year earlier, while earnings attributable to shareholders improved by 35% to R595-million.
The gross profit margin declined to 38,1% from 40% due to the lower-margin discount division growing at a faster rate than the department-store division, higher markdowns than 2004 on seasonal winter merchandise and the outperformance of cellular sales, the company explained. This decline was, however, more than offset by continued improvements in operational efficiencies, which translated into an increase in the operating margin to 11,3% from 10,6%.
Group stock turn rose to 5,9 times from an already high 5,7 times.
Divisions
The department-store division, comprising Edgars, CNA, Boardmans, Red Square, Prato and Temptations, represented 60% of group sales. The division reported a 16% increase in sales and a 32% rise in trading profit.
Edgars delivered turnover growth of 15% with an inflation rate of only 2%. Boardmans, which is now fully integrated into Edgars, contributed to the significant growth in sales of the home-living merchandise category.
Stationery chain CNA increased its sales by 21%, reporting more than 20% growth in turnover from interactive media, cellphones and audio products. A focus on inventory management saw the chain improving its stock turn to 3,5 times from 2,9 times in the prior year.
The discount division — Jet, Jet Mart, Jet Shoes and Legit, which represent 40% of group sales — increased its sales and trading profit by 28% and 30% respectively for the six-month period.
The Jet chain increased sales by 25%, notwithstanding the 28% reduction in its average selling prices. Sales in Jet Mart, meanwhile, rose by 68% on the strength of improved flow and assortment of product. Jet Mart’s gross profit margin rose to 24,5% from 20,1%.
Commenting on the outlook, Ross said: “Prospects for the remainder of the year look good and the board remains confident that sales will continue to grow at a satisfactory rate for the remainder of the current financial year, albeit at a slower pace than in the first six months.
“Nevertheless, in spite of lower gross margin percentages than last year, the group will again benefit from operational leverage and should deliver another meaningful rise in attributable earnings, along the lines of the growth in sales, for the year as a whole.”
Ross added that the group is continuing to look at the possibility of buying Myer Stores in Australia.
Over the past year, Edcon has expanded its average retail space by 8% across its department-stores division and by 9% in its discount division. The total number of stores has risen to 871 from 696 a year earlier.
The group’s credit and financial-services division saw profit rise by 24% to R117-million, driven by expanded insurance offerings. The active account base increased by 320 000 to 3,8-million Edcon card holders, resulting in a rise in the moving annual net bad-debt write- off to debtors to 7,1% from 7% for the year to the end of March 2005.
However, Edcon said, collections from customers remained robust, and a healthy 86% of accounts under administration were current and able to purchase, from 87% last year. — I-Net Bridge