Edcon to revive private labels

EDCON is considering selling noncore assets — but this will not include any of the group’s retail brands.

New Edcon CEO Bernie Brookes said this week that his priority was to move Edcon to a more consumer-focused organisation and to re-establish the group’s private labels. But should Edcon decide to sell some of its operations it would not include any store brands.

“We might decide to sell our second book that we have in the credit facility. We might also decide to sell distribution centres, call centres, infrastructure and head offices and maybe lease them back. These are some the noncore assets that we are looking at, but there are no plans to split up Edcon or sell any of its divisions.”

Brookes said that despite Edcon experiencing growth in pro forma adjusted earnings before interest, taxes, depreciation and amortisation for five conservative quarters, the retailer still lagged behind competitors.

Edcon’s retail sales declined by 0.1% to R6.2billion for the three months ended in September.

Cash sales showed 5.6% growth, while credit sales, which contributed 40.3% to total sales, declined by 7.6%. The group’s earnings before interest, taxes, depreciation and amortisation were up 3.1% to R501-million. Its net loss widened to R2.1-billion compared with a loss of R627million in the previous same period.

“We had a very strong underlying first-quarter margin, but we did make a decision in September to clear a large quantum of stock that we had in Edgars which affected the margin.” This resulted in the gross-profit margin declining to 35.4% from 35.8% in the prior comparative quarter.

Brookes said good retailing was about clearance as you go. “This you do so that you do not let stock accumulate and have about 100 thick cardigans when it starts to warm up. We also had a very short winter and therefore we got stuck with a lot of stock.”

July, August and September clearance sales had merchandise marked down by 75%.

“However, what it enabled us to do was get in new stock in September — and it gave us a fresh start for summer.”

Brookes said he was a bit disappointed with the buying in certain areas. “It is possible for buyers to pick the right colour one season and the wrong colour the next season . . . This time around it was a combination of wrong buying in children’s wear, women’s wear and footwear and, added to that, it was a very short winter,” he explained.