Sweeping changes at Edcon

Edcon, the retailer whose chains include Edgars, CNA and Legit, will make sweeping changes under new boss Bernie Brookes as the ailing group tries to claw back market share.

The debt-burdened retailer, which reported on Thursday a fall in second-quarter sales, wants to boost store space productivity and e-commerce, as well as revive its high-margin private label brands such as Kelso.

Brookes and his team have been visiting stores as they focus on customer research.

“There does need to be a significant change in strategy … even though the business has had five consecutive quarters of ebitda (earnings before interest, taxes, depreciation, and amortisation) growth — we’re still well behind the pack in terms of sales … we have the poorest space productivity in the country and we’re working hard on it.”

Brookes joined Edcon at the end of September after nearly a decade leading Myer, Australia’s largest department store.

Edcon, once one of the retail sector crown jewels, was bought by Bain Capital for R25-billion in 2007 in a deal that burdened the retail group with debt.

Over the three months to September 26, its net loss widened to R2,1-billion, compared with a loss of R627-million a year earlier. Over the quarter, its debt rose 15% to R27-billion.

A decision to clear winter stock early hurt the group’s gross profit margin, which declined to 35.4%, from 35.8% in the June quarter, partially offset by increasing first margins before clearance.

In the Edgars division, cash sales growth increased 6%. Credit sales growth declined 6.7%. Same store sales fell 2.6%.

The discount division suffered from a 10.7% drop in credit sales, resulting in retail sales decreasing 0.1%.

Same store sales were 2% lower. At CNA, same store sales slipped 5.6%.

The group’s plan to return Edcon to its pre-eminent position in the market also included simplifying its business model and increasing credit sales through an in-house credit book and lay-byes, Brookes says.

“We are not in the midst of selling (noncore assets), but anything, everything and nothing could happen,” Brookes says. Capital expenditure of R600-million to R700-million has been pencilled in for the 2016 financial year.

By Zeenat Moorad for www.bdlive.co.za

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