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Edcon smartens up as creditors take over

3 Feb 2017

Edcon officially belongs to its creditors with effect from 1 February, after it convinced senior lenders to accept a shareholding in the company, restructured its debt and made changes to the structure.

Bernie Brookes. Image via Business Day

Edcon's major shareholder grouping now comprises banking and investment firms that include many South African institutions such as FirstRand. Edcon CEO Bernie Brookes said an internal restructuring that would ensure improved profitability and future growth was under way.

He said: "We are already seeing benefits at store level, in technological improvements, customer care and ensuring that our employees are better informed, trained and remunerated. We expect these and certain other initiatives to be rolled out for the next year, before we start seeing anticipated and meaningful benefits."

An Edcon representative said it was estimated the meaningful benefits of the new owners' initiatives would bear fruit in about a year to 18 months.

"There are numerous activities underway, which are all clustered under three pillars: customer-centricity, simplicity and people empowerment.

"Within these pillars, there are initiatives aimed at improving customer service, a better product offering, pricing issues, refining the supply chain, information technology systems, store layouts, employee morale and training, among many other aspects of the business," the representative said.

A key challenge in righting the Edcon ship includes getting rid of ageing inventory, some as old as three years.

"This is an ongoing process, but good progress has been made and we are 80% through the stock.

"The stock in Edgars and Jet is cleared and the only remaining excess is in our speciality divisions and some of the international brands."

Edcon's operational debt has been reduced to about R7bn from just under R27bn a year ago. But the group said debt would not be the focus, at least not for 2017.

"At this stage - and with the debt position now improved - our absolute focus is on restructuring the overall shopping experience by ensuring a better customer experience and an enhanced product offering in all Edcon's stores," the representative said.

The new board of directors was being finalised and would be announced in due course.

In the three months to end 24 December, Edcon said retail sales declined 3% from the year earlier. Gross margins also fell 3%.

Source: Business Day

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