BID FOR SURVIVAL
Edcon is looking for white-knight investors
Troubled clothing retailer Edcon confirmed it is in talks with new investors in its efforts to ensure its survival.
Edcon, which employs 14,000 permanent staff members and a further 25,000 temporary workers and operates 1,350 stores, has been struggling to stay afloat.
It has debt of R7bn and has had to fight hard to maintain its relevance in a clothing retail market that has seen local and foreign rivals such as Mr Price and Zara taking market share.
CEO Grant Pattison said on Monday that the group, which operates the Edgars, Jet and CNA chains, was negotiating new leases with its landlords as a way to cut costs.
Pattison is the former Massmart CEO who was brought into the company in January to lead the group’s turnaround.
"Edcon’s balance sheet recovery programme has been under way for some time as we continue to focus on completing a recapitalisation of Edcon. Part of the process is the continuing discussions with various stakeholders, which include lenders, landlords, potential new investors, and others," said Pattison.
Business Day’s sister newspaper, The Sunday Times, reported at the weekend that Edcon was close to liquidation and had asked landlords for help to reduce its rent in order for it to survive. Edcon’s statement confirmed it was talking to its landlords, and added that it was looking to outside investors.
"The group continues to review its strategic alternatives with respect to the group’s business and corporate and capital structure, including, inter alia, a merger or acquisition process."
Pattison and Edcon did not give any details on what kind of deal was being negotiated with potential investors and how long they have been in talks. Pattison did say all stakeholders had indicated their strong commitment to the process.
Edcon, one of SA’s oldest surviving retailers, has struggled since Bain Capital bought it in 2007 for R25bn just as the global financial crisis was unfolding. The company was taken over by banks and bondholders in 2016 to stave off collapse. Bringing in a new investor would give a much-needed boost to the struggling retailer, while it completed its restructuring process.
Despite bringing in R5bn in sales and only seeing a 0.6% rise in cost, the company pointed out that profitability remains under pressure, which is why it is working hard to reduce costs and recapitalise the business.
The possible closure of Edcon would not only threaten the jobs of its employees, but could seriously threaten some of the country’s property groups.
According to the Financial Mail in November, the retailer accounted for 10% of occupancy in SA’s major shopping malls.
On Monday the SA Federation of Trade Unions said should Edcon go ahead with the lay-offs it would be the single-biggest loss of jobs in SA’s history.
"The country that already has the world’s sixth-highest rate of unemployment could well move up to first place," it said.