Edcon posts rise in gross profit for June quarter

EDCON, the unlisted owner of clothing chains Edgars and Jet, said yesterday gross profit rose 5.9% to R2.4bn for the three months to June 29, while same-store sales dropped 0.3% as refurbishments in stores disrupted operations.

Edcon, which is in the midst of reviving its Edgars chain, has underperformed its peers and lost market share since its highly leveraged private equity buyout in 2007 by Bain Capital. Edcon’s net loss widened to R714m in the period compared with R214m a year earlier.

Edcon CE Jürgen Schreiber said the Edgars “72-store” refurbishment programme was progressing well.

“The heavy build element of this programme negatively affects results, but initial numbers from the first 16 stores completed during June are promising and the work is still on track to be substantially completed before the beginning of the Christmas trading period,” he said.

The group’s strategic initiatives also include improved sourcing, beefed-up merchandising teams and the addition of international brands such as Dune London, Lucky Brand, and Lipsy to attract footfall.

The Edgars division grew retail sales 1.2%, while same-store sales decreased 3%. Edcon has received Competition Commission approval for the acquisition of a controlling stake in the companies retailing, under licence, the international brands Accessorize, La Senza and Inglot in SA, which have a combined 42 standalone stores and kiosks across the country.

The group’s discount division, which includes Jet and Legit, saw sales increase 4.7% while same-store sales were 1.7% higher.

CNA sales grew 4.5% and samestore sales were 3.6% higher.

“Edcon’s expansion outside of SA continues to progress well,” the company said.

Edcon owns 39% of Edgars Zimbabwe, a Zimbabwean listed public company which is independently managed. In the implementation of International Financial Reporting Standards 10, Edgars Zimbabwe was reassessed and the results of this entity have been consolidated from March 31 last year.

The Edcon group expects to expand its footprint at a “measured rate” and recently secured store space in Ghana.

Sales from countries outside SA contributed 9.9% (8.2% excluding Zimbabwe) of retail sales for the quarter, up from 8.4% in the prior comparative period.

Edcon said that within a broader South African environment, unsecured lending growth had continued to slow and pressure on the consumer had increased, resulting in a lower growth in total retail sales. However, information from Statistics SA continued to support a more positive view on apparel sales growth as it had consistently exceeded total retail sales growth.