/ 22 August 2013

Edcon losses rise as store remodeling disrupts sales

Edcon, the holding company of fashion retailers such as Edgars, Truworths and Red Square, saw first-quarter losses soar. (Supplied)

Edcon, the South African clothing retailer owned by Bain Capital Partners, posted higher first-quarter losses as store revamps disrupted operations and sales fell.

The company's net loss rose to R714-million in the three months to June compared with R214-million a year earlier, the Johannesburg-based company said today. Gross profit increased by 5.9% to R2.4-billion, while store costs rose by 7.3% to R1.3-billion.

Edcon, which owns chains including Edgars, Jet, CNA, Boardmans and Red Square, had 1 301 outlets at the end of the period, with the average retail space rising by 4.2%. South African retailers have reported weaker sales growth this year as rising unemployment and inflation put the brakes on consumer spending.

"In the Edgars division, the implementation of the second phase of the 72-store refurbishment programme is well under way,” Edcon said. "The heavy build element of this programme negatively affects results, but initial numbers from the first 16 stores completed during June are promising and the work is still on track."

The yield on Edcon’s €317-million of 9.5% bonds due in March 2018 had fallen by 10 basis points to 12.07% at 11.22am in Johannesburg.

Rising unemployment
Inflation rose to 6.3% in July, exceeding the 6% upper limit of the central bank’s target for the first time in 15 months as a weaker rand boosted fuel costs and electricity prices climbed.

After the introduction of Topshop Topman last year, Edcon has secured the franchise rights to TM Lewin, Dune London, Tom Tailor, Lucky Brand and Lipsy. These brands will be rolled out mainly through the shop-in-shop concept in Edgars.

Bain Capital, based in Boston, bought Edcon for about R25-billion in May 2007 to tap into rising economic growth in Africa’s largest economy. Revenue from operations outside South Africa now contribute 9.9% to total retail sales. – Bloomberg