Tag: Edcon

According to an article published in the Sunday Times at the weekend, former Exclusive Books CEO Benjamin Trisk is willing to re-engineer Edcon’s flailing CNA brand.

This follows his recent departure from the book retailer after a breakdown with the company’s shareholders. Hired in 2013, he spent the past five years in charge of a turn-around strategy after the store had experienced a series of failures.

Trisk told Business Times this week that he would only consider joining CNA if approached. “I would probably look at it very seriously. However, I must make it clear that I have not been approached.”
“But I’m not leaping into anything. I’ve had one approach from overseas which I can’t talk about at the moment. Locally I’ve also had approaches, but I think it’s quite early in the cycle,” he said.

CNA: Edcon’s white elephant

CNA has long been in the doldrums. In 1997, Wooltru bought CNA out of CNA-Gallo for R447-million.
A turnaround plan was implemented but failed dismally and in 2001, the company was sold to Gordon Kay & Associates for R192-million. By the following year, CNA was in liquidation.
Edcon, under the leadership of US retailer Steve Ross, snapped up CNA for R141-million, but 16 years later the retail brand continues to make losses.
CNA is part of Edcon’s speciality division, that once housed Legit, Edgars Shoe Gallery and the group’s non-profitable brands.

According to The Sunday Times, Chris Gilmour, an investment analyst, said: “They tried hard, but couldn’t win. They [Edcon] are thinking about getting out anyway, they can’t keep on putting more money into it. [CNA] is a pile of unadulterated rubbish that should have died 20 years ago.”
Gilmour said South Africa didn’t have a high-street retail culture anymore, making it difficult for brands such as CNA to have a market “and as a result the model is completely shot”.
Meanwhile, Alec Abraham, a senior equity analyst at Sasfin Wealth, told The Sunday Times: “I don’t know what they [CNA] are and I don’t know if they know what they are.”
He said there was a likelihood that CNA would end up in a similar situation to that of Musica, where “they can’t find a buyer because no one wants to buy this unfit business and they are running with the idea as long as they are not losing money on it. And if they are going to be the last man standing, then so be it.”

An Edcon spokesperson has confirmed that CNA is not for sale.

According to Edcon’s latest financial results, for the 13 weeks to December 23 last year, CNA has 196 stores, including 11 Samsung stores, positioning its offering in electronics, stationery, gaming and the limited book retail offering.

Original article by Palesa Vuyolwethu Tshandu for The Sunday Times

Edcon may close flagship Edgars store

According to a recent article by Business Day, Edcon is considering closing its flagship Edgars store in the Johannesburg CBD.

This will form part of the ailing retailer’s turnaround strategy, as the company determines whether the Edgars brand is still a viable one to CBD commuters.

Edcon CEO Grant Pattison told Business Day that part of the idea was to have Edgars located in regional malls where it could take advantage of the traffic density.

“We are probably going to end up with one store in the CBD and it’s likely to be Jet.”

The Johannesburg CBD is home to three Edcon stores: an Edgars department store, a Jet store and a Jet Mart.

The 89-year-old retailer opened its first Edgars store in Joubert Street, Johannesburg, and has grown to have more than 1 300 shops across Southern Africa with nearly 12-million customers.

Edcon first alluded to the downsizing of space in a recent quarterly statement and has already closed more than 200 stores.

“I am a cynic about whether retail is changing, but what is fundamentally changing is the retail customer,” Pattison said.

Edcon reported a 9.4% decline in group retail sales to R7.6-billion for the third quarter of 2018, which ended on December 23. Total group revenue declined 8% to R8.187-billion.

Edcon’s flagship store, Edgars, has been struggling to find its place among modern South African consumers, who are enjoying shopping at international stores like H&M and Zara.

Earlier this month the company reported a quarterly sales decline. According to an article published by the Sunday Times, Edcon decided a few years ago to go with more fashionable expensive assortments and they forgot about their heartland customer, which is at the very centre of the business.

“If they are not selling the merchandise they have in their stores then they have to change their strategy, and Edcon appears to have been through some major changes,” Andrew Jennings, former president of Saks Fifth Avenue, GM of Harrods and MD of Woolworths, and author of Almost is Not Good Enough – How to Win or Lose in Retail, is quoted as saying.

Over the past decade, Edcon has struggled with leadership as its three CEOs have made some notable strategic blunders. The company has been in operation for 89 years. As of March 2017, Edgars had 1 343 stores including 187 stores in eight countries outside of South Africa.
Edcon has been selling off stores – the Legit store chains, with the exception of those operating in Botswana, were sold effective 29 January 2017 and the Edgars Shoe Gallery store chains closed during the 2017 financial year.

In addition, Edcon has closed 253 stores – but this has left the retailer with too many leases in malls and no brands to fill the empty space

According to The Sunday Times, the store has been trying to find a solution to this empty floor space and as such has introduced a coffee shop into its Eastgate Mall store called Made Café . This serves both to use up empty space and to act as a drawcard to the store, following the modern consumer trends.

Edcon’s profits up despite sales decline

Unlisted retail group Edcon reported on Tuesday that its net profit improved by 3.8% to R2bn, although sales declined in the September quarter from the matching period in 2016.

Edcon said its overall retail sales suffered from “fierce price competition through ongoing promotions by competitors” and its decision to close unprofitable stores.

In its flagship Edgars clothing chain, sales declined 0.9% to R2.46bn during the three months to September 23. Sister clothing chain Jet’s retail sales declined 1% to R2.28bn.

Edcon’s “speciality” division, which houses news agency CNA and Edgars Shoe Gallery, reported a 41.5% decrease in sales to R463m because the comparative period included Legit, which was sold in January. Excluding Legit, the speciality division suffered an 11.4% decline in sales. CNA’s sales fell 12.1%.

“Our trading environment remains challenging as consumer demand is weak on the back of tight credit conditions, low growth in consumer disposable income, political uncertainty and restrictive fiscal policy,” Edcon CEO Bernie Brookes said.

“Despite this, it is pleasing that the group’s strategic transformation is delivering positive retail sales growth in certain merchandise categories, such as ladieswear in both Edgars and Jet, as well as cellular in Jet, while childrenswear, footwear, cosmetics and cellular within Edgars are also starting to show signs of change.”

By Robert Laing for Business Live

South Africa’s troubled retailer, Edcon Group, has said that it would appoint Grant Pattison, the former Massmart boss, as its new chief executive next February in a vote of confidence for home grown talent.

South African-born Pattison has been tasked with implementing the group’s strategy, revitalising CNA, growing Edcon’s cellular business and growing the company in South Africa and the rest of the African continent.

Speaking to journalists at the company’s headquarters in Johannesburg yesterday, Pattison said he planned to step up to the challenge of restoring the Edcon’s image.

“The challenge of restoring Edcon to its former glory is both a privilege and a massive challenge,” he said.

Edcon has lost significant market share from local and international competitors, and was trying to claw back its diminishing customer base.
Pattison said he was not fazed by challenges in the retail sector.

“I am a professional chief executive and someone has to step and help the company through these times,” Pattison said.
Pattison, who is currently a non-executive director, will replace Bernie Brookes. Brookes will step down following a two-year tenure at Edcon.

Brookes, the former managing director of the Myer Group, is set to extend his contract, which was due to run until January next year.

To ensure a smooth transition, Pattison will be appointed as Edcon’s chief executive and chief operations officer designate on June 5, joining the executive management of the group and reporting to Brookes.

Brookes said that CNA had lost its path and the company would need to spend R100 million to revitalise the stores’ brand image.

“CNA fiddled in far too many categories. When you fiddle, you fail. We will take CNA back to its roots of being a stationery store. For example we were selling DVDs,” he said.

Brookes said that the company would eliminate the sale of items like toys at CNA.
“We will limit the sale of toys to peak periods like Christmas and Valentine’s Day,” he said.

Edcon is the largest clothing, footwear and general merchandise retailer in South Africa, completed by the sale of its Legit business for R637 million.
It operates more than 1400 stores with nine store formats and annual revenues of R25.2 billion.
The company said it had put the brakes on opening new stores and that there were 120 less stores this year compared with last year as part of the company’s plan to consolidate struggling operations.
“We have more space than any other retailer in South Africa. In some cases we have stores in the central business districts and we have stores in rural areas which are struggling because of the drought.
“We are planning to close struggling stores, and we will change labels in favour of more profitable ones,” he said.
Edcon, whose division includes Edgars, Boardmans, Red Square and mono-branded stores, has decided to exit international brands in favour of local brands.

By Dineo Faku for www.iol.co.za

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

Sticky tape can’t fix CNA

There’s JM Coetzee’s Disgrace depressing, and then there’s the CNA. You’d be hard-pressed to find a store that evokes starker feelings of gloom and desperation than Edcon’s centenarian stationery and bookshop chain.

Back in 1896 when it first opened its doors, a decade after Jo’burg was founded, CNA was probably on trend. It was WHSmith for the tip of Africa — all papers and periodicals, pots of ink and slide rules.

Today, it’s another story.

Spend five minutes in any of its 198 stores, amid its shemozzle of harsh strip-lighting, deeply impractical white floor tiles and rows of ring binders and packets of elastic bands, and you’ll reassess your life choices. Who, you wonder, is the market for their endless range of serial killer paperbacks and scrapbooking paper?

Customers clearly feel the same way, which is probably why CNA’s sales plunged 7.2% for its financial year to March, after falling 5.6% the year before.

It’s still making a profit, but the graph is only going one way.

Perhaps underplaying the problem, owners Edcon said tersely in a presentation last month that the business “requires new strategy and engineering”. The problem is, the modern CNA is an anachronism.

Bar an impressive stock of Mills & Boon (One Week With the French Tycoon, anyone?), there isn’t much you could need from CNA that you couldn’t find elsewhere.

There’s Exclusive Books for books, Incredible Connection for gadgets, Waltons for the boring stationery and Typo for the cool stationery.

And, most pertinently, there’s the Internet and takealot.com for all of the above.

Even in the 1990s, CNA was a relatively pleasing place to spend your money.

Its Formica shelves (very en vogue at the time) were lined with paper dolls and imported magazines, wrapping paper and the indisputable crack of newsagents — those collectable series that came out every fortnight.
Their “back to school” campaigns were a winner. The scramble to secure rolls of brown paper, exam pads and Space Cases, if you are my vintage, from your local store must be etched in the minds of generations of customers.
But 20 years on, nothing has changed. Today, those shelves seemed jaded. The stock is undercurated and underwhelming.

Edcon CEO Bernie Brookes, who aptly describes CNA as “broken”, has big plans to fix the company.
Quite how remains to be seen.

What’s clear is that in 2016, it’s going to take a whole lot more than sticky tape and overpriced get-well-soon cards to mend this damaged business.

By Sarah Buitendach for Financial Mail

Where to next for Edcon?

After Bain bid adieu, it’s now time to ‘clean up’ Edcon Banks, who are owners of the struggling retail group, are mum on the retail group’s prospects.

When Edcon CEO Bernie Brookes took to the stage at the South African Council of Shopping Centres Annual Congress in Sandton earlier this month, his presentation was premised on retailers that are ahead of the curve.

The emboldened Brookes said retailers like global supermarket chains Aldi and Lidl, and the home-grown discount apparel retailer Pep have either capitalised on online shopping, aggressively competed on price or successfully managed costs.

The 57-year old was pandering to an audience of largely shopping mall owners, landlords and managers that have been at the brunt of Edcon’s consolidation of floor space, largely at its flagship brand Edgars and CNA.

At the time of Brookes’ presentation, the 87-year old retail group was probably adding the finishing touches to its radical ownership structure changes.

Brookes announced last week that US-based private equity firm Bain Capital will relinquish the control of Edcon to its creditors as it finally loses its grip on the battle to manage the retail group’s smothering R26.7 billion debt pile.

This arrangement means that creditors will surrender their debt in the company and replace it with Bain’s 75% stake – paving the way for new owners at Edcon.

Market watchers call Bain’s exit the worst private equity scenario in South Africa, as it’s walking away with nothing from its initial R25 billion leveraged buyout of Edcon in 2007 – which marked its foray into the African continent. Shortly after the deal, Edcon started to introduce more debt in the business for its operations. At the time, market conditions were favourable as retailers and banks fervently dished out credit to consumers and the domestic economy pulled in a growth of more than 4%.

Then the global financial crisis hit, darkening Edcon’s fortunes.

US-based asset management firm Franklin Templeton, an early backer of Edcon through its 10% stake, will now become Edcon’s largest single shareholder along with other foreign funds, collectively owning 70% of the retailer.

High-flying bankers such as Barclays Africa, Standard Bank, Investec Bank and Rand Merchant Bank, who were lenders to Edcon, will now make up the remaining 30% of the local shareholding.

A new board at Edcon will be assembled in the next two months.

New owners are tight-lipped

Banks at the moment are mum about plans for Edcon to claw back market share at a time when there are few signs of a revival in consumer spending, rising living costs and heated competition from Woolworths, The Foschini Group and international apparel retailers such as Zara, Cotton On and H&M.

Even Franklin Templeton is tight-lipped, finding refuge in its corporate mandate of “not commenting on specific companies/holdings and stocks.”

There are already concerns about the prospects of corporate bondholders – with limited clothing retail experience – running the show at Edcon. This concern is warranted if the track record of banks being involved in retail groups is anything to go by. Cue Absa, which has tightened the credit taps to consumers since it bought Edcon’s store-cards book for R10 billion in 2012.

Cedric Rimaud, the director of emerging-markets research at Gimme Credit in Bangkok said it had become evident for some time that the sale to Absa of the credit book had been a mistake as Edcon has struggled to generate sales on credit.

Credit sales continued their downward trend – declining by 15.6% for the 13 weeks to June 25 2016. Its cash sales fell by 2.7%. Edcon used promotions to clear its old merchandise to raise cash for operations, which promptly weighed on its sales growth.

Bain didn’t have a choice but to exit after Edcon deferred cash interest payments of R1.6 billion in April to December and has in recent years asked bondholders to take a haircut (or losses) on bonds – buying the retailer time for its turnaround.

“It was probably difficult to find a white knight to rescue Edcon from the hole it found itself in. The macroeconomic context in South Africa has been extremely difficult, the retail sales are decelerating, with rising inflation and monetary tightening weighing on consumer spending,” Rimaud told Moneyweb.

The new ownership structure will reduce its debt obligations from R26.7 billion to R6 billion and present a cash flow injection of R3 billion that will be used to pay creditors, landlords, suppliers and service providers.

Independent analyst Syd Vianello said the debt reduction will give it breathing room. “But it’s insufficient. I think it’s going to be hard convincing clients and suppliers to continue supplying them. It’s possible that they will get it right but it ain’t going to be easy,” says Vianello.

He added that Edcon’s efforts are dwarfed by losses – with its trading profit declining by about R318 million during the period. “Even though this new restructuring puts money in the bank, money is going out in other areas of the business,” Vianello explained.

Stabilising Edcon

Radical changes are already taking place at Edcon since Brookes, who is the former chief of Australia’s largest department store Myer, took over from Jürgen Schreiber nine months ago. “I have cut all the costs that I can but I have also doubled the expenditure on consumer focus groups and consumer research.”

To stabilise the business, Edcon planned to sell its non-core assets. It announced the sale of its ladies’ apparel brand Legit to private equity firm Metier for R637 million.

“We also got a lot of offers for our businesses such as CNA, Red Square and Boardmans,” says Brookes, but the pricing didn’t make sense. There was a consensus in the market that retail tycoons Markus Jooste and Christo Wiese would be ideal suitors for Edcon’s assets.

Brookes said there will be some more cleaning up at Edgars as it looks to drop some international fashion brands and focus on its high-margin private label brands such as Stone Harbour and Kelso.

Under Schreiber’s leadership, Edcon aggressively pushed international fashion brands such as Top Shop, River Island, TM Lewin, Lucky Brand, Tom Tailor and Dune into Edgars – an expensive exercise which flopped.

Edcon plans to spend over R600 million over the next three years on opening over 60 new stores that will add to its current 1 542 stores.

Other turnaround measures include improving customer service and space productivity and launching online shopping channels at Jet and Edgars.

Time will only tell if Edcon will be ahead of the curve again.

By Ray Mahlaka for www.moneyweb.co.za

Edcon shows signs of recovery

Edcon has released a statement to trading partners to update relevant stakeholders on the latest developments relating to activities and events underway within the group.

The group has redefined roles and responsibilities at head office, with Andrew Levermore assuming the position of COO.

The group is reshaping the capital restructure to support long term growth and reduce the debt. In the past year, Edcon has reduced its debt by R4,5-billion and cash interest burden by R1-billion. Debt maturities have also been extended to December 2017.

Edcon is in the process of closing certain stores while opening new outlets. Approximately 60 new stores will be opened in the next two years, including numerous group store concepts in the 131 000 square metre Mall of Africa.

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