Edcon Loss Narrows as Renovated Stores Attract Customers

Edcon Holdings Pty Ltd., South Africa’s largest clothing retailer, said its first-quarter loss narrowed as more shoppers visited revamped stores while talks are under way with lenders about boosting credit to customers.

The net loss was 499 million rand ($46.6 million) in the three months through June compared with a year-earlier loss of 712 million rand, the Johannesburg-based company said in a statement today. Store costs rose 13 percent to 1.5 billion rand as the company completed a 72-outlet refurbishment program, while debt increased to 22.7 billion rand.

The yield on Edcon’s 425 million euros of 13.375 percent bonds due June 2019 fell 210 basis points to 19.49 percent as of 3:14 p.m. in Johannesburg, the biggest drop since it was sold in November 2013.

The improved results “show the strength of the conversion of the stores,” Chief Executive Officer Jurgen Schreiber told reporters on a conference call. “The base for change has now been built,” and the company “is satisfied that performance has stabilized.”

Edcon’s chains, including Edgars, Jet, CNA, Boardmans and Red Square, operated 1,430 outlets at the end of the period, with average retail space rising 5.1 percent. South African retailers have reported weaker sales growth this year as rising unemployment and inflation discourage consumer spending.

Multiple Quarters

Bain Capital, based in Boston, bought Edcon for about 25 billion rand in May 2007 to tap into rising economic growth in Africa’s second largest economy. The private equity firm has set a target for multiple quarters of profitability before a sale or initial public offering can take place, Schreiber said in an interview last month.

Revenue from operations outside South Africa accounted for 11 percent of retail sales in the quarter, up from 9.9 percent a year earlier. The company now has 183 stores outside its home market. The first three stores in Ghana are planned in this financial year.

Edcon wants to enable shoppers to buy more clothes on credit to boost sales as high unemployment and inflation weigh on disposable incomes. Loan approvals have halved since Edcon sold its private-label store cards business to Barclays Plc unit Absa Bank in 2012. The retailer, which is in talks with African Bank Investments Ltd. about being an alternative provider to its customers, relies on credit sales for 47 percent of total revenue, down from 51 percent a year earlier.

African Bank was put into administration on Aug. 10, setting Edcon’s credit sales back “a couple of months,” Schreiber said. While Edcon will continue talking to African Bank, it’s also in discussions with other potential partners to “see what is for us the best solution,” he said.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE