According to a report by the Financial Mail, Edgars may “effectively run out capital towards the end of 2019”.
After Bain Capital paid R25-billion for the company, the retailer’s balance sheet saw debt of R17.3-billion – an amount that nearly sank the company as the 2008 financial crisis hit.
Since 2012, Edcon has lost an estimated 22% of its clothing and footwear market share where it once held more than 50% of the sector, according to Financial Mail.
Edcon still owes an estimated R7-billion to its lenders.
On a positive note, Stats SA reported that retail sales grew 2.5% for the year to August — almost twice the 1.4% annualised growth reported in July.
The problem is, says the Financial Mail, that Edcon is making a loss, and “someone has to fund the loss”. This falls to the shareholders and the problem under discussion is “how long will they fund these losses”?
Edcon’s most recent set of accounts, for the year to March 2018, saw sales down 4.8% to R24.1-billion. Trading losses ballooned to R1.36-billion from R373-million in 2017. Even though R20-billion in debt was written off in 2016, Edcon incurred R1.53-billion in “financing costs” to repay remaining debt. The three months to June were no better: sales were down 8.8%, and the quarter saw trading losses of R225-million.
The lack of customers are evident at even flagship Edgars stores. “At Melrose Arch, most of the initial space Edgars occupied is boarded up, reinforcing the impression of a gradually disintegrating department store,” reports Financial Mail.
As many as one in five South Africans used to shop at one of the 1 350 stores owned by Edcon. Despite the downward trend, Edgars has remained SA’s largest nonfood retailer, accounting for nearly a third of the clothing and footwear market.
The company employs more than 27 000 staff members, with an indirect effect on a further 100 000 people.