Ed­con’s weaker re­tail sales af­fect rev­enue

The Star Early Edition - - OPINION & ANALYSIS - Di­neo Faku

ED­CON, South Africa’s big­gest fash­ion re­tailer, yes­ter­day blamed weaker re­tail sales for the 5.8 per­cent drop in to­tal rev­enue in the sec­ond quar­ter of its 2018 fi­nan­cial year.

Ed­con, whose brands in­clude Edgars, Jet and CNA , said to­tal rev­enue de­clined to R5.9 bil­lion in the sec­ond quar­ter of 2018 from R6.26bn in the sec­ond quar­ter 2017, due to weaker re­tail sales.

Re­tail sales tanked by 6.2 per­cent to R5.401bn from R5.761bn, im­pacted by the sale of Le­git, the exit of non-prof­itable in­ter­na­tional brands and the clo­sure of un­prof­itable stores. Ed­con sold its Le­git brand to Re­tail­abil­ity for R637 mil­lion.

Ed­con also at­trib­uted the lower re­tail sales to weak con­sumer de­mand and fierce price competition through on­go­ing pro­mo­tions and clear­ance ac­tiv­ity by com­peti­tors and strate­gic in­tent to exit non-prof­itable stores.

Like-for-like re­tails sales weak­ened by 2 per­cent, how­ever, pos­i­tive re­tail sales growth was achieved in ladies’ wear in both Edgars and Jet, chil­dren’s wear, footwear and cos­met­ics in Edgars and Cel­lu­lar in the Jet di­vi­sion.

Dur­ing the sec­ond quar­ter 32 stores were opened and 50 stores were closed.

Da­mon Buss, an eq­uity an­a­lyst at Elec­tus Fund Man­agers, said yes­ter­day that neg­a­tive like-for-like sales growth in­di­cates Ed­con are still los­ing mar­ket share.

“It is pos­i­tive that Ed­con are ex­it­ing un­der-per­form­ing stores and brands,” he said.

Ear­lier this month Ed­con ri­val TFG said credit turnover growth had risen by 6.2 per­cent in the six months to Septem­ber, de­spite slug­gish trad­ing in the gen­eral re­tail sec­tor. Ed­con lost 383 000 credit cus­tomers, ex­clud­ing Edgars Zimbabwe, in the sec­ond quar­ter of 2018.

On a twelve month rolling ba­sis, credit sales ex­clud­ing Zimbabwe de­creased to 35.4 per­cent in the sec­ond quar­ter 2018 from 37.1 per­cent of to­tal re­tail sales in the sec­ond quar­ter 2017.

It also said its in-house trade re­ceiv­ables book as at Septem­ber 23, 2017, was R660m, from R177m as at Septem­ber 24, 2016, and had in­creased by R242m com­pared to R418m as at March 25, 2017, fol­low­ing the re­vised ar­range­ment with Absa im­ple­mented in the third quar­ter of 2017.

Credit sales de­creased by 3.8 per­cent com­pared to the prior pe­riod, while cash sales plunged by 7.6 per­cent.

Ed­con said Mike El­liot would be join­ing the group as Edgars chief ex­ec­u­tive des­ig­nate, with ef­fect from De­cem­ber 4, 2017. El­liot was ex­pected to as­sume the role of chief ex­ec­u­tive on Fe­bru­ary 1, 2018, and re­place Andrew Lev­er­more who has re­signed from the group.

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