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