Edcon considers sale of noncore stores

EDCON Holdings says it is considering a sale of noncore stores as it struggles under the weight of crippling debt and low apparel retail sales growth.

This comes as total debt of R19.8bn in the nine months to December 2013 had risen to R21.7bn in the same period last year, the group said during its quarterly report on Friday. In the year ended last March, Edcon reported a loss of R2.5bn.

While cash sales of merchandise rose 11.8% in the nine months to December, credit sales declined 7%. Normally, credit sales are bigger than cash sales. Retail sales of R8.8bn in the December quarter were only 0.5% higher than in the same period a year ago. Trading profit was R919m in the nine months.

The group has not named the assets it may put up for sale, but household goods retailer Boardmans and CNA, a retailer of stationery and other consumables, are clearly noncore to its clothing business.

“Edcon has initiated a process to eliminate operational inefficiencies,” group CE Jürgen Schreiber said on Friday.

“This includes the streamlining of roles and responsibilities, consolidation of certain functions, elimination of duplications and the leveraging of technological opportunities.”

Founded in 1982 by Tom Boardman, a former CE of big four bank Nedbank, Boardmans was acquired by Edcon in 2004. It now has 34 stores.

In 2007 Edcon was taken over by private equity house Bain Capital in a debt-laden R25bn buyout. But the global market crash of late 2008 and subsequent poor economic growth in SA have damaged the domestic retail environment, also depressing the credit supply growth that has always been the bedrock of retailing business models.

CNA has 195 stores across the country, selling products from stationery and newspapers to books and music CDs. The chain’s former 139 stores were rescued from liquidation by Edcon in 2002.

Despite the growth in stores and other capital investment, CNA’s then R7.4bn turnover had plunged to R2.1bn in the year to March last year. Operating profit had also declined, dropping from R163m in March 2012 to R69m last year. Edcon has not provided segmental information for the nine months to December.

Beauty, fragrances and cosmetics brands retailer Red Square’s 39 stores are another likely candidate for sale or closure. They occupy standalone stores inside shopping malls, and are a duplication of the same beauty products that can be found inside every Edgars store, usually in the same mall.

Divisions of the group are in talks with labour unions over possible retrenchments, according to sources within the South African Commercial, Catering and Allied Workers Union

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