Bain’s Edcon Reports Quarterly Loss as Edgars Sales Decline

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Edcon Holdings (Pty) Ltd., South Africa’s largest clothing retailer, reported its 12th consecutive quarterly loss as sales fell at its flagship Edgars fashion chain and debt increased 10 percent.

The net loss was 188 million rand ($16 million) in the three months ending Dec. 27 compared with a loss of 415 million rand a year earlier, the Johannesburg-based company owned by U.S. private-equity firm Bain Capital Partners LLC. said in a statement on Friday. Edgars sales fell 0.8 percent, offset by a 2.5 percent gain at the lower-cost unit, which includes the Jet clothing chain.

The yield on Edcon’s euro-denominated bond due June 2019 rose for the first time in four days, gaining 91 basis points, or 0.91 percentage points, to 57.04 percent by 2:07 p.m. in Johannesburg. A close at that level would be the biggest daily increase since Jan. 19. Edcon was cut one step to seven levels below investment grade on Sept. 30 by Standard & Poor’s, which cited its “substantial debt” and declining sales on credit.

Edcon is struggling with rising interest costs and waning financing opportunities as a slowdown in economic growth last year and unemployment of about 25 percent hurt consumer spending. Rolling blackouts caused by a power shortage have also constrained trade at South African retailers.

“Consumer sentiment is subdued and demand remains constrained, exacerbated by the challenging credit environment and the negative impact of power outages,” Chief Executive Officer Jurgen Schreiber said in a separate statement.

Debt Rising

Net debt stood at 21.7 billion rand at the end of 2014, compared with 19.8 billion rand a year earlier.

“Edcon continues to assess ways to improve its capital structure and actively manage its future liquidity needs,” Schreiber said.

The company, which a year ago reduced the workforce at the 13,000-employee Edgars chain to improve its financial performance, said Feb. 2 that it plans cuts at its head office this year, without saying how many positions will be lost.

Bain, based in Boston, bought Edcon for 25 billion rand in 2007 to tap rising consumer spending in Africa’s second-largest economy. Edcon, which owns chains including CNA, Boardmans and Red Square, has been revamping stores in an effort to regain market share.

“The new brands are attracting more customers into the Edgars’ stores while also differentiating the overall offering,” Schreiber said, referring to a strategy of selling clothing from international labels such as Tom Tailor and Mango. “Stand-alone stores such as River Island, Top Shop and T.M. Lewin, among others, are exceeding expectations.”