Edcon is considering closing its flagship Edgars store in the Johannesburg central business district (CBD) as part of a turnaround strategy to rescue the ailing retailer.
At a recent gathering in Johannesburg, Edcon CEO Grant Pattison, who was brought in to revive the group after a decade of sluggish performance, said part of the idea was to have Edgars located in regional malls where it could take advantage of the traffic density.
Edcon first alluded to the downsizing of space in a recent quarterly statement and has already closed more than 200 stores, including those sold in the Legit transaction.
Pattison said the company was determining whether it was still viable to offer the Edgars brand to CBD commuters.
“We are probably going to end up with one store in the CBD and it’s likely to be Jet,” Pattison said.
The Johannesburg CBD is home to three Edcon stores: an Edgars department store, a Jet store and a Jet Mart.
The 89-year-old retailer opened its first Edgars store in Joubert Street, Johannesburg, and has grown to have more than 1,300 shops across Southern Africa with nearly 12-million customers. With the Boardmans and Red Square brands in its stable, the Edgars division targets middle-to upper-income consumers, while the Jet brand has discount stores, which sell value merchandise targetting lower-to middle-income consumers.
“I am a cynic about whether retail is changing, but what is fundamentally changing is the retail customer,” Pattison said.
He said retailers “need to remain connected to trends of customers and respond quickly. We need to undo what caused the business to suffer in the first place.”
This has included the removal of international brands and the reintroduction of local brands such as Kelso.
Independent retail analyst Syd Vianello said he was not surprised that there were store closures owing to the company’s poor financial performance, but he expected many more closures to follow.
“If it is the CBD store, so be it,” Vianello said,
“Edcon is losing money and they have to cut costs.
“Edcon has been on a backward streak with no balance sheet to leverage off.
“Notwithstanding that, consumers have been dealt a blow with VAT [value-added tax] and petrol price increases”36One analyst Evan Walker said Edcon “still had too much debt and their earnings have not been stellar”.
The reconfiguration of Jet did not seem to be happening, he said. Edcon competitors had been smart in segmenting their market for the 0-15 year old market.
“Ackermans and Pep have moved on aggressively into the Jet market, with their presence even in large regional malls,” Walker said.
The downward spiral of Edcon has been characterised by the sale of its creditors book and the flooding of local stores with international brands, among other damning features that have seen consumers directing their buying power elsewhere.
Edcon reported a 9.4% decline in group retail sales to R7.6bn for the third quarter of 2018, which ended on December 23. Total group revenue declined 8% to R8.187bn. – BusinessLive