‘Forex trading relaxation will raise USD generation’

Tapiwanashe Mangwiro

Edgars says trading in foreign currency has allowed its retail chains to boost stock selections, which has improved customer traffic.

Given the Zimbabwean dollar’s volatility, there is an increasing demand in both the formal and informal sectors for payments to be made only in foreign currencies.

To reduce financial losses, the majority of enterprises have kept up their pursuit of US dollar transactions.

“Trading in foreign currency since April 2020 has allowed our retail chains to improve stock assortments, which in turn has increased traffic in our stores,” chairman Thembinkosi Sibanda said in a statement accompanying the group’s results for the half year ended July 10, 2022.

In comparison to the same period last year, the total number of group units sold grew by 35 percent, from 0,94 million to 1,27 million.

“While a sizable portion of our
cash sales are in foreign currency, we believe that further relaxation of foreign currency trading will go a long way in increasing our US dollar generation to fund
imports.”

Market watchers are of the view that most companies are probably going to trade less in local currency owing to the liquidity restrictions brought on by the introduction of gold coins and the tightening of the money supply, which signify a switch in the functional currency to the US dollar.

Despite the challenges in the operating environment, the group’s inflation adjusted revenue for the period under review, rose 114 percent to $10,33 billion from $4,82 billion in the comparative period.

Profit after tax was up 540.01 percent to $1,22 billion and profit before tax advanced 891 percent, to $2,85 billion.

“The growth in real terms is attributed to volume recovery, replacement cost-based pricing, ongoing cost management practice as well as initiatives implemented by Management to ensure fresher stock availability in our stores, regardless of the supply chain challenges,” he said.

Gearing declined from 0,21 in the previous year to 0,14 in the current year.

“Funding was channelled towards growing the debtors’ book as well as store expansion initiatives. At the end of the reporting period, the company had US$262 000 foreign liabilities which it will be able to service from existing resources.”

By opening new stores in prime areas, the group hopes to increase its geographic reach.

To ensure that target margins are met without sacrificing the quality of the merchandise, Sibanda said intelligent merchandise procurement is still a significant emphasis area.

“We will continue to transform our customer experience through revamping our stores to world class standards, offering widened merchandise ranges at affordable prices and flexible credit terms,” he said.

“The recovery to the business is premised on the back of improved access to foreign currency through domestic sales to cover import requirements, a stable exchange rate and slower inflation.”

It seeks to maintain the highest levels of inventory investment.

“This is in order to improve stock turns, and that target margins are achieved without compromising merchandise quality and sales volumes,” he added.

The company did not declare a dividend.