Nompumelelo Magwaza
Edcon Holdings, which made a loss of R1.15 billion in the nine months to December last year compared with a R894 million loss a year earlier, planned to exit its Discom stores brand by converting these into its two growing brands, Edgars Active and Legit, chief financial officer Steve Binnie said yesterday.
In its third quarter to December, the Edcon group closed down 32 non-performing stores – mostly Discom outlets. However, it opened 57 stores under the Jet and Legit labels.
“Our Edgars Active and Legit stores are performing very well. That is one of the reasons why we have decided to convert our underperforming Discom stores into these two growing brands,” Binnie said.
He added that Edcon would complete the conversion of the 60 remaining Discom stores by June this year.
The group yesterday announced that it had recorded a net profit of R199m in the thirteen weeks to January 1 compared with R166m in the previous comparable trading period.
Retail sales rose to 12.3 percent to R8.3bn from R7.4bn in the third quarter last year.
Trading profit, or earnings before interest, taxes and some financial items, rose 4 percent to R1.095bn.
Binnie said Edcon had a good Christmas period with an increase of 12.3 percent in retail sales, with same-store sales rising 10.5 percent. This performance, Binnie said, was the highlight for the group.
Edcon, whose chains include Edgars, Jet, Legit and CNA, said that despite concerns about negative macroeconomic indicators and international credit markets, retail sales in South Africa remained resilient.
The Edgars department store division increased its sales by 13 percent due to growth in cellphone sales, footwear and children’s wear.
CNA sales rose 11 percent mainly from the strong sales from cellphones, digital gadgets and confectionery.
The group said credit sales accounted for 51 percent of total sales, up from 49 percent.
Active accounts stood at 3.9 million compared with the 3.8 million in financial 2011.
Edcon said its discount division, which included Jet and JetMart, had increased sales by 11.7 percent.
“Although we have not relaxed our credit risk we have certainly witnessed an increase in customers applying for store cards, which indicates that customers were now willing to spend again,” Binnie said.
Chris Gilmour of Absa Investments said Edcon continued to be the leading clothing retailer in South Africa.
“The store’s books look impressive and they have also improved their debt collection activities,” he said.
Gilmour added that it was surprising that sales in the department stores were much higher than those in the discount division, as more sales normally came from the discount-price stores.
The group said store costs rose to R115m, with R18m going to electricity payments.
Binnie said that the operational cost included the R109m used for various chief executive transitional projects that included development of a real estate strategy to support growth.
He said Edcon was looking at expanding floor space by 5 percent next year.