Edcon to sell part of Edgars chain to Retailability
EDCON Holdings has agreed to sell part of clothing chain Edgars to a private equity-backed regional rival, potentially safeguarding a 91-year-old brand and saving thousands of jobs.
Administrators led by Lance Schapiro and Piers Marsden struck a deal with Retailability, a holding company for brands Legit, Beaver Canoe and Style, which owns 460 stores across southern Africa. The details of the transaction will be finalised based on further agreements, the business-rescue team said in a statement yesterday.
“This is a good outcome for Edgars – if the deal goes through – because they might be able to save more jobs than expected,” said Lulama Qongqo, an analyst at Mergence Investment Managers in Cape Town.
“Depending on the purchase price, lenders and real-estate investment trusts may be able to recoup some of the funds owed to them.”
Edcon was put into business rescue in late April, after the lockdown wiped out sales and curtailed a recovery from a 2019 restructuring. It was put up for sale alongside sister chains Jet, which specialises in low-cost clothing, and Thank U, a finance and loyalty-card unit. Rescue plans for the other parts of Edcon are at an advanced stage, the administrators said. The company as a whole employs almost 18 000 permanent workers and hires about 5 000 more on a seasonal basis.
Less than half the 199 stores that fall under the Edgars stable are deemed viable, according to the business-rescue plan for Edcon, meaning some job losses are inevitable.
“I can’t see it continuing in its current form, and the new owners may well have to rationalise the business,” said Rella Suskin, the head of research at Benguela Global Fund Managers in Johannesburg. “With South African consumers lacking much disposable income, other local retailers may have been better off without Edgars in the picture. Still, the saving of jobs is a positive outcome.”
Retailability, based in Durban, has backers including DEG of Germany and Johannesburg-based Metier Private Equity. Many potential suitors “have been deterred by the complexity of the business and separating parts from it”, Qongqo said.
But Retailability, which bought fashion chain Legit from Edcon four years ago, “has done it before” and “it could be more viable in their hands versus other potential suitors”.