JOHANNESBURG - Moneyweb reports that Edcon, South Africa’s largest clothing retailer, has lost 485 000 credit customers in the past year.
Edcon's full year annual report releases that their accounts declined from 3.4 million a year ago (and 3.5 million in FY2015) to 2.915 million accounts as at March 25.
This number has been in steady slump since its 2009 peak of 4.29 million, with declines accelerating since the sale of its book to Absa (/Barclays Africa) in 2012.
Since that transaction, Edcon has reportedly lost nearly one million (net) credit customers.
This is equivalent to a quarter loss of its core credit account base.
Edcon CEO, Bernie Brookes confessed that Edcon has a “burning platform” to deal with: its debit pile and its appeal to customers.
Barclays has significantly secured the supply of store credit as it scored customers against stricter lending criteria.
“Credit sales have remained under pressure as a result of tighter lending criteria applied by Absa since November 2012”, says Edcon.
The company was in negotiations with African Bank Investments to be a so-called “second-look” credit provider prior to the collapse of the lender into curatorship in August 2014.
Edcon's other options were bleak and to start providing credit to customers was “tested” in 2015.
Its second-look book had grown to R164 million by end-March 2016.
Edcon then re-entered negotiations with Absa last year (for which Edcon incurred R28 million in costs) where “Absa accepts and grants approximately 20% of new accounts with the balance of credit accounts being funded by the group”.
Absa was unwilling to accept eight out of every ten new credit account applications.
As a result, Edcon will lend to “medium- to high-risk customers” while “Absa will continue to lend to the low-risk customers”.
This new agreement became effective in November - Edcon having traded for five months of its 2017 financial year under the new terms.
Edcon's in-house receivables book more than doubled to R418 million as at March 25.
Despite this, Edcon warns that its “new arrangement with Absa will take a period of time to drive new credit customers and the number of credit accounts back to acceptable levels”.
Business Day reported in May, that Edcon has shut down stores in a bid to save sales.
This is attributed to so-called 'retail cannibalism' whereby a company's new stores steals customers from existing stores.
Edcon subsequently closed eight Edgars stores, four Jet stores and five Jet Mart stores in the year ended-March 25.
- BUSINESS REPORT ONLINE