Edcon Plans Hiring Spree to Boost Recovery After Bain’s Exitby
South African clothing retailer to add more than 2,000 staff
Job creation to give boost to economy with 27% unemployment
Edcon Holdings Ltd. plans to increase its workforce by almost 7 percent and slash prices as South Africa’s largest clothing retailer kick-starts a recovery plan following the exit of U.S. private equity firm Bain Capital Partners LLC.
The owner of the Edgars and Jet chains is seeking to lure customers back to its stores with more than 2,000 new staff specifically trained in the clothing ranges in their departments, Chief Executive Officer Bernie Brookes said in an interview on Wednesday. The move will help to undo the impact of job cuts made by Johannesburg-based Edcon as it struggled under a debt burden caused by Bain’s 25 billion-rand ($1.8 billion) purchase in 2007.
“We must be the only value-added department store in the world where you self serve shoes, when what you really want is somebody to come and try them, fit them, make sure they are the right size,” Brookes, 57, said at Bloomberg’s Johannesburg office. “I expect by the time we finish we will end up putting 2,500 people back into the stores to provide good customer service.”
About a fifth of those may come from stores Edcon is closing, he said, while the rest will be hired.
The CEO is embarking on a four-year turnaround plan after Bain handed ownership of Edcon to creditors including Franklin Templeton of the U.S. in a debt-for-equity swap, reducing the debt burden to 6 billion rand from 26.7 billion rand. The 87-year-old retailer, which employs about 30,000 people outside of peak season, has seen sales decline in its more than 1,500 stores while managing the business largely to make debt repayments, Brookes said.
Edcon plans to “stop the rot” in its first year under the ownership of creditors, cease losing market share in the second and start to claw it back in years three and four, the CEO said. The retailer plans to sell shares on the Johannesburg Stock Exchange when the business is in better shape, he said.
The company will also cut prices and accept a lower profit margin on clothing to increase sales and compete in a market toughened by the entry of overseas retailers such as Hennes & Mauritz AB and Inditex SA-owned Zara, Brookes said. Edcon will reduce the number of international brands in the Edgar stores, some of which were ill-suited to South African tastes, according to the CEO.
Edcon is gaining some extra financial breathing room through the 637 million-rand sale of its Legit fashion chain. The divestment also helps “create a simpler, more agile business that is focused on carefully selected offerings,” Brookes said. While talks aren’t taking place to sell other peripheral units such as CNA, Red Square or Boardmans, the company would consider offers at the right price, he said.
Once these units “are fixed up, we would see if we would do one IPO of the whole business or could consider selling some then,” said the CEO, who joined Edcon a year ago after previously running Melbourne-based department store Myer Holdings Ltd.
South African consumer confidence has been hurt by an unemployment rate of 27 percent while economic growth is expected to slow to 0.1 percent this year, according to the International Monetary Fund. Retail sales grew at the slowest pace in more than two years in July, and Edcon reported a 8.1 percent drop in first-quarter retail sales to 6 billion rand.
“When I looked at this business, as complex as it was, I thought I could make a difference here,” Brookes said. “We know we’ve got a plan that will work and we can turn this business around.”