Edcon profits take a knock

Edcon, which is not listed, owns Edgars, Jet, CNA, Boardmans, Red Square, Discom, Prato, Temptations and Legit.

The group said Thursday, 20 August, that earnings before interest, tax, depreciation and amortisation dropped 6.6% to R737-million for the quarter, from the comparable period a year ago. Retail sales growth slowed and increased by 2.2% to R5.3-billion.

Strong children's wear sales in both Edgars and the Discount Division underpinned the results, while Edgars reported higher cosmetics sales.

CNA increased its turnover of books, stationery and digital products, while the Discount Division reported good sales in footwear and other non-clothing items.

Cost management continues to be a focus for the group and store costs grew by 7.5%, mainly due to an additional 6.3% in trading space. Other operating costs were 12.3% lower than last year.

Cash generated from operating activities was up 14%.

Edcon is obliged to release quarterly information because of requirements of bond analysts, given the group's Eurobond.

Chris Gilmour, an analyst at Absa Investments, said the sales growth was a bit slow “but this is more in line with figures from Stats SA and could explain the disconnect between figures from Stats SA and healthy results from listed retailers”.

Gilmour said the debtors book appears to be very well controlled, but questions whether the 2% sales growth was organic sales growth and what their internal inflation rate was.

“This is the biggest clothing retailer in the country by far. It's a good indication as to what's actually happening out there.”

He said Edcon would be a beneficiary of lower interest rates — not only will its vast customer base have more money to spend, but Edcon's interest bill will fall substantially.

Chief executive Steve Ross said despite the difficult trading environment “we are still able to generate strong cash flows and winter stocks have been cleared”.

Edcon recently announced the raising of R1-billion in the largest securitisation deal in the South African market since last August. The funds will pay down existing debt.

Source: The Times

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