Edcon returned to profit in the second quarter after debt repayment costs eased following the exit of US private equity firm Bain Capital, while the retailer cleared unwanted stock to boost sales over the busy festive period.
Net income for the three months through September was R163m, the Johannesburg-based owner of the Edgars and Jet chains said in an emailed statement on Tuesday. That compares with a R2.1bn loss a year earlier.
Cash sales increased 0.8%, although a slump in purchases on credit meant total revenue declined 6.8%.
“Within each of the Edgars, Jet and Specialty divisions, there is significant momentum underway of internal change,” CEO Bernie Brookes says. “While we still have some way to go, progress is pleasing.”
Under Brookes, Edcon is battling to turn around the business after Bain’s exit in September eased the debt burden from the US firm’s 2007 takeover to R6bn from R26.7bn.
The company needs to boost sales and profit at the same time as South African consumer confidence is struggling amid the weakest economic growth since 2009 and unemployment of 27%.
“The difficult consumer environment, led largely by challenging macro-economic factors, continued to weigh on the group’s share of profits,” Brookes says.
“To improve the aged stock profile ahead of the third quarter, we undertook increased and focused clearance during the quarter, specifically in the Edgars division.”
Franklin Templeton, a fund based in San Mateo, California, became Edcon’s single largest shareholder after Bain’s exit, Brookes says.
By John Bowker for Fin24