Edcon Holdings Pty Ltd., South Africa’s largest clothing retailer, said first-quarter sales slowed as falling credit purchases weighed on trading.
Retail-sales declined 0.9 percent in the three months through June as an increase in cash transactions failed to offset an 11 percent slump in paying at a later date, the Johannesburg-based company said in a statement on Thursday.
South African shoppers’ reduced ability to take on credit, weak economic growth and job losses affected the business, Chief Executive Officer Jurgen Schreiber told reporters on a call, a week before he leaves the company. “The situation will last for a little bit longer and the recent situation of the rand is not helping as it will lead to price increases.”
South African consumer confidence dropped to a 14-year low in the second quarter of this year, hit by frequent power cuts and rising fuel prices that weighed on the economy. The country’s currency tumbled to the lowest level since 2001 on Wednesday, while retail sales growth slowed to 2.4 percent in May from 3.4 percent the previous month.
Edcon’s chains, including Edgars, Jet and CNA, operated 1,527 outlets at the end of the period. Cash sales, which account for 58 percent of the total, climbed 7.4 percent. Edcon’s net loss widened to 828 million rand ($64.9 million), compared with a year-earlier loss of 499 million rand.
Bain Capital Partners LLC, 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 deal burdened the retailer with debt, which gained 6.7 percent to 24.2 billion rand in the quarter.
In June, Edcon asked holders of the company’s 425 million euros ($464 million) of 2019 bonds to take a loss as the company seeks to stabilize its balance sheet. Almost all of the bondholders last week accepted the exchange offer, cutting Edcon’s net cash interest payment obligations by about 1 billion rand. Edcon is not in talks with other bondholders for further restructuring, Schreiber said.
The bond exchange “has substantially improved our cash flow,” he said. “The focus now is operations, it’s not on working on further bond changes.”
Edcon wants to enable shoppers to buy more clothes on credit to boost sales, Schreiber said. Loan approvals have halved since Edcon sold its private-label store cards business to Barclays Africa Group Ltd. in 2012. Edcon has started talks will an alternative provider to its customers, Schreiber said, without giving further details.
Bernard Brookes, who was CEO of Victoria, Australia-based Myer Holdings Ltd. until May, will replace Schreiber at the end of September.