EDCON’s new Australian CEO Bernie Brookes promises the faded retail giant’s star will shine brightly again.
“We sit in the middle of four (major) competitors and don’t really stand for anything,” Mr Brookes said on Wednesday.
Mr Brookes has been in the job for about two months, following a nine-year stint as CE of Australian retailing giant, Myer. He acknowledges Edcon faces a poor trading environment in the next few years and that it will have a more “difficult Christmas” than competitors.
The country’s largest apparel retailer will still owe R22bn in debt after December 2017, having negotiated a debt holiday until then. It was crippled after new owner, private equity group Bain Capital, added huge new liabilities to its once ungeared balance sheet, ahead of the global financial crisis.
The group would offer high-quality fashion through its Edgars stores and range of international brands, while adopting a “best price, low-cost model” for its Jet Stores discount operations, so it could “pass good value on to customers”.
Change has meant cutting executive headcount from 17 to nine and further streamlining group headquarters. It also means scanning customer purchases with hand-held devices while shoppers queue to pay, as part of speeding up checkout.
Meanwhile, Edcon has conducted a survey of 3,000 customers, admitting “that we don’t know our customers very well”.
“Our plan is to drive cash sales and credit sales,” Mr Brookes said. The group was re-building its own in-house credit book worth about R200m after selling the original one in 2012 to Absa, which took a generally conservative approach to funding customer spending.
Change also means prioritising the South African business, while further expanding into Africa. The group has 1,527 stores in SA, Botswana, Mozambique, Namibia, Swaziland, Lesotho, Zambia, Ghana and Zimbabwe. The African operations have three divisions, comprising Edgars, Jet and Edcon’s credit and financial services offerings.
Edcon also said it was training the next level of senior managers to run operations.
Rather than clothing and accessories flying off the rails, the group has largely gone off the rails since Bain Capital bought it in 2007 for R25bn.
Independent retail analyst Syd Vianello maintained on Wednesday that Mr Brookes had a tough row to hoe.
“He’s got a monumental task ahead of him. Fixing the finances was easy — the alternative was liquidation.”
He said Bain had relied on its foreign bondholders to fund the business, “but the chance of getting new money is zero”.
“I think the party is over as bondholders have taken a blood bath,” he said. He also said that the substantial debt restructuring had only enabled Edcon to “tread water”.
“(But) put the right products in stores and you will get sales. They are going to have to get the mix right. Get this right and customers will come back. In the meantime, (they) have new competitors,” he said.
These include Australian apparel retailer Cotton On, which has invested in SA in a big way. Meanwhile, Swedish fashion retailer H&M has just opened flagship stores in Cape Town and Sandton.
Source: Business Day.