Edcon plans move into Ghana, Nigeria next year
Edcon CEO Jürgen Schreiber
THE owner of Edgars and Jet, Edcon, will open stores in Ghana and Nigeria next year, CE Jürgen Schreiber said on Thursday.
As the world’s second-fastest growing region, the continent’s booming economies have caught the eye of retailers in search of higher yield and untapped consumer spending potential.
Edcon continues to use discount fashion brand Jet as a beachhead to move into new African markets.
The budget-conscious offerings of Mr Price and Pep are proving to be increasingly appealing to an emerging middle class, which is still price-sensitive.
Woolworths, which targets a more affluent customer has decided to exit the Nigerian market as operating in the West African country failed to provide the right level of return.
Trading in African countries is not risk-free and exorbitant rental costs, corruption, bureaucracy and supply chain issues pose as challenges.
“This (Africa) remains an exciting opportunity going forward. We normally go into a new country with Jet. In Zambia though, we went in with Edgars too — it’s working well. In the second half of next year, we’ll go into Ghana with both Edgars and Jet, because the market is quite strong. In Nigeria we’ll take a discount approach and not an Edgars one at this point,” Mr Schreiber said.
Outside of South Africa, Edcon operates 154 stores across Botswana, Namibia, Lesotho, Swaziland, Zambia and Zimbabwe.
Edcon, which is South Africa’s largest clothing retailer, reported 5.9% increase in retail sales to R6bn for the three-month period ended September 28.
Same-store sales increased 1.2%, mainly as a result of strong cash sales of 17.4% and despite the disruption caused by the refurbishment initiatives in the Edgars’ division and credit sales for the group reducing by 4.3%. An improvement was seen in the company’s discount division, which includes Jet and Legit, on the back of a strong performance in ladies and menswear.
The 72-store refurbishment programme of its core Edgars chain is near completion, Mr Schreiber said. Edcon, which has underperformed its peers and lost market share since its highly leveraged private equity buyout in 2007 by Bain Capital, has also put in place strategic initiatives which include improved sourcing, beefed-up merchandising teams and the addition of international brands such as Dune, Lucky Brand and TM Lewin to attract footfall.
Edcon’s net loss narrowed to R724m in the period compared with a restated R2.7bn a year earlier.
Due to the weak credit environment, Edcon ended the period with 100,000 fewer customers able to access credit.
On a 12-month rolling basis, credit sales decreased from 51.4% in the prior comparative period to 49% of total retail sales. The slowdown in unsecured lending, which gave South African retail sales a significant lift prior to last year, has been one of the major contributors to the decline in spending, as local consumers who are feeling pressure from soaring utility costs, also battle to repay loans and settle accounts.
Foschini Group, which sells about 60% on credit, in November noted that it had seen strong growth in cash sales over the last six months.
The Edgars’ division grew retail sales 3.4%, and same-store sales were 1.6% lower, affected by disruptions from transformation initiatives.
The Edgars revival project has cost R443m so far.
The Discount division saw sales increased 10.3% and same store sales were 5.4% higher. Sales from its Africa division contributed 11.4%.
Edcon expects to spend R1.2bn on capital expenditure in the 52-week period ending March 29 2014.