CONTRACT EXTENSION EXPECTED
Brookes set to keep reins in Edcon drive
Australian Bernie Brookes must undo the damage done by his predecessors at the retail powerhouse, writes Ann Crotty
First order of business at next Tuesday’s inaugural meeting of the just-appointed Edcon board will be the extension of Bernie Brookes’s contract, which expires in September.
Brookes’s reappointment on any terms seems a certainty. It would not be much of a stretch to say Edcon’s future lies in the Australian’s hands. It will be largely down to him to undo the damage wreaked on what was a retail powerhouse by another foreigner, German Jurgen Schreiber, and Bain Capital Partners, which appointed Schreiber to take over from Steve Ross in April 2011.
In May 2015, news of Schreiber’s departure was apparently greeted with much relief by Edcon employees. A number of strategic blunders under his rule saw the group’s comparatively disappointing performance in the few years up to 2011 move into overdrive. The key take-out of it all was that in 2007 when Bain Capital Partners pulled off the private-equity deal, Edcon had a nonfood market share of 28%. That has been whittled down
Schreiber’s style was a large part of the problem and it was reinforced by similar traits among major bondholders. That the bonds were listed meant regular trading information had to be made public, but little communication accompanied it.
It did not help that most of Schreiber’s executives were foreigners too. Being aloof from Edcon’s South African environment explains many of the missteps by the top management and aggravated the effect of the dramatic rise in domestic competition.
Brookes is wise enough to avoid talking about his predecessor, but he acknowledges some "strategic missteps". The emphasis on expensive international brands and the heavy focus on making Edcon efficient rather than customer-centric were key mistakes, says Brookes. There was also the lack of investment in information technology.
"We’re working with a point-of-sale system that is about 20 years old," says Brookes. It did not help with customers who expect speedy service and it was another factor undermining staff morale. As Edcon has an impressive 9-million registered customers, it also meant it squandered valuable marketing opportunities. "We’ll be making a sizeable investment over the next 12 months aimed at collecting all the customer-centric information."
For those who realise the importance of being in touch with staff, customers and the community, Brookes’s much more open attitude goes a long way to explaining the generally widespread support he has garnered so far.
I’m angry I didn’t make it bullet-proof enough against international competitors and online shoppingBernie Brookes
He is reportedly spending a lot of his time in stores and, although the group no longer has a listing of any kind, also readily talks to the media. Given the hubris that dogged the Bain Capital Partners’ reign, it is encouraging that he suffers no illusions — not just about the difficulties facing Edcon, but also his own track record at Australian department store Meyers. He did very well at first, then not so well.
"I’m angry I didn’t make it bullet-proof enough against international competitors and online shopping," said Brookes, alluding to one of the challenges he now faces in SA.
Brookes says many problems he faced (and solved) at Meyers are familiar. "But in addition to the international chains Edcon faces far tougher local competitors than Meyer did," he says.
And his contract extension?
Brookes, almost 60, says this is his "last full-time gig" and he is determined to retire on a high. Bondholders, who last week swapped R27bn in bonds for equity, are certainly hoping he does, as no doubt are the 45,000 employees and Edcon’s growing South African supplier base. A relisting in about three years is on the cards if "sustainable levels of profitability" are attained. But it will not be an easy time, says Brookes. "A lot can happen."