Shades of the extinct John Orrosaurus . . .

THE fate of Edcon, owners of Edgars and Jet among others, seems to be mirroring that of former local retailing mainstay John Orr’s, which faded into oblivion in the late ’80s as a younger generation of consumers flocked to newer stores.

Mr Price founders Stewart Cohen and Laurie Chiappini acquired the ailing John Orr’s group in October 1986 — and only two years later disposed of the branded stores.

Today, Edcon risks a similar fate as it goes up against trendier stores such as H&M, Forever 21 and Cotton On.

Industry commentators say the only viable way to boost profits is for the retailer to dispose of its noncore assets. The group’s brands also include Boardmans, CNA and Red Square.

“We fully acknowledge that a more sustainable and long-term solution must be found, which is precisely what we have been advancing over the past few weeks and months, and we can expect announcements on this in the near term,” Edcon CEO Bernie Brookes said last week.

“We know that this will not be an overnight change.

“In fact, we anticipate that we will start to see a meaningful turnaround over the next 12 to 18 months.”

Industry pundits do not seem convinced about the retailer’s prospects, given its debt obligations.

36ONE analyst Nico Smuts said it was clear that the Edcon group was under “significant stress” as a result of multiple pressures that have been building up for several years.

“Besides the strategic missteps, they also struggled with a large, foreign-currency-denominated debt burden, which was placed on Edcon when Bain Capital acquired it in 2007.

“The rand value of interest payments has increased rapidly in line with the depreciation of the local currency, to the point where Edcon on two occasions failed to meet its obligations towards debtors on time and had to either postpone interest payments or restructure debt.”

In 2013, Edcon declared a R714-million loss in the three months to end-June, according to Bloomberg, and retrenched 3 000 employees.

Last year, the group appointed Brookes, who managed to reduce debt by R4.5-billion and the interest burden to R1-billion. The company extended the maturities of outstanding debt instruments until December next year.

Last month, the group requested a deferral on its interest payments, which Brookes said would allow Edcon to save R1.6-billion of liquidity, which it intends to use for its ongoing operational turnaround.

One effect, said independent analyst Syd Vianello, was that “those bondholders who went into the organisation last year are not going to receive any interest or capital until [about] 2020, so they are effectively locked in and are not going to receive any cash for many years”.

We know that this will not be an overnight change

Vianello said that the 2019 bondholders, who were told that their interest was being deferred until December, were going to have to accept that they would not receive any interest in December either.

“I don’t believe Edcon will generate enough to service the interest coupon,” he said.

It is no wonder that S&P Global Ratings assigned the 2018 Edcon bonds a D credit rating, the lowest possible rating on the S&P scale, indicating that there is weakness in Edcon’s balance sheet.

Smuts said that improving the health of the business could include “restructuring debt, breaking up the group, selling noncore assets or finding a strategic buyer willing to inject capital”.

But if Edcon is on its last legs, news of its imminent demise — or even the need to slow down — has not reached the group: it has announced its intention to open 62 new stores over the next three years.