Edcon Hires ex-Massmart CEO to Lead Retailer's Recovery PlanBy
Grant Pattison to replace Bernie Brookes at end of January
South African retailer says full-year earnings, profit fell
Edcon Holdings Ltd. hired former Massmart Holdings Ltd. head Grant Pattison as chief executive officer, installing a new leader to plot the turnaround of South Africa’s largest clothing retailer amid weak consumer confidence and falling sales.
Pattison will replace Bernie Brookes at the end of January, Johannesburg-based Edcon said in a statement alongside full-year earnings on Thursday. The 46-year-old is best known for selling a majority stake in Massmart to Wal-Mart Stores Inc. in 2011, before resigning from the general goods retailer three years later.
“Restoring a company like Edcon to its former glory is a privilege and a challenge,” Pattison told reporters in Johannesburg, adding that it’s not his objective to simply try and sell the retailer.
The new CEO will start as chief operating officer on June 5 and be given immediate responsibility for newsagent chain CNA and the company’s stores outside South Africa. Brookes, who joined Edcon in September 2015 and oversaw the easing of a crippling debt burden that threatened to bankrupt the retailer, has extended his contract until February to ensure a smooth transition.
Pattison’s task will be to restore growth at the owner of the Edgars and Jet chains after earnings and revenue slumped in the year ending March 25, a period marked by the exit of former owner Bain Capital. The U.S. private equity firm ceded control to creditors led by Franklin Templeton in a debt-for-equity swap in September, easing the company’s debt burden to 6 billion rand ($465 million) and freeing it up to focus on restoring sales growth.
South African retailers are struggling as shoppers resist non-essential purchases amid weak economic growth and employment of 27 percent. The firing of Finance Minister Pravin Gordhan at the end of March and the subsequent downgrades of the country’s credit rating to junk status has further weakened consumer confidence, and both Massmart and casino operator Tsogo Sun Holdings Ltd. said this week that the drop-off in sales has been notable.
Adjusted earnings before interest, taxes, depreciation and amortization rose 25 percent in first month of the new fiscal year, with sales on credit outperforming cash purchases, Edcon said.
One of Edcon’s challenges has been dealing with a drop off in approvals for shoppers wanting to buy on credit after Barclays Plc’s South African unit took over the retailer’s book in 2012. Edcon opened its own lending service to counter the issue, and about 80 percent of new credit customers are getting money extended to them by the retailer rather than the bank, Brookes said.
"We could get that book to a couple of billion rand in two years or so, with no real difficulty," the CEO said.
Retail sales fell 6.7 percent to 25.3 billion rand in the year ending March 25, the Johannesburg-based company said. Adjusted Ebitda fell 45 percent to 1.4 billion rand. Edcon opened 76 stores in the 12-month period, 20 fewer than in the previous year.