Retail sales declined by 9.4percent to R7.6billion in the December quarter from R8.4bn in December 2016, impacted by the sale of the Legit business, the exit of non-profitable international brands and the closure of unprofitable stores.
“Our strategy of exiting non-profitable international brands and the optimisation of merchandise categories and store rationalisation has impacted on our retail sales performance with like-for-like retail sales decreasing by 4.9percent,” the company said.
Total revenues for the group, whose brands include CNA, Jet and Edgars, declined 8percent to R8.18bn during the quarter under review because of the R795million slump in retail sales compared to the prior period, while like-for-like retail sales decreased by 4.9percent.
Daniel Isaacs, an analyst at 36ONE Asset Management, said yesterday: “I think like-for-like revenue down 5percent points to a very weak result and continued market-share losses. Whatever they are trying to turn the ship around does not seem to be working yet.”
The group took a strategic decision to exit certain international brands, including Express, Geox, Lucky Brand and One Green Elephant, in order to focus on in-house brands such as Kelso and Stone Harbour. In a move to create a simpler and more agile business, Edcon sold its Legit business for R637m to the Retailability group.
It also trimmed its top management structure and took steps to reduce the number of its suppliers.
The Edgars division was hardest hit. Retail sales dived 6.9percent to R3.525bn in the quarter from R3.787bn in December 2016. In the Jet division, retail sales slumped by 2.7percent to R3.293bn from R3.3bn.
Edcon said it planned total capital expenditure of between R500m and R600m for the 2018 fiscal year.
Capex for the quarter under review declined by half to R118m from R236m.
The group said it opened 34 new stores during the period, which, combined with refurbishments, resulted in an investment of R105m in its stores.
Operating cash inflow before changes in working capital declined to R397m from R449m in 2016 as a result of a weaker trading performance.
The gross profit margin for the third quarter was 38percent, up 190 basis points (bps) from 36.1percent in the third quarter of 2016.
“The improvement in the gross profit margin was achieved through improved input costs, negotiated supplier rebates and settlement discounts, as well as a reduction in clearance and promotional markdowns,” the company said.
Gross profit dropped to R2.907bn from R3.046bn on the back of a weaker-than-anticipated third-quarter retail sales performance.
Margins in the third quarter improved by 70bps, as input costs were well managed over the period.
Edcon is under new management after private equity firm Bain Capital agreed to a debt-for-equity-swop valued at $1.5bn in 2016.
- BUSINESS REPORT