Johannesburg, South Africa – Edcon, the largest non-food retailer in southern Africa with 1,167 stores, today reported a 9,0% rise in revenues to R27,345 million for the year to 31 March 2012, as consumer demand remained resilient and the positive impact of various strategic initiatives gained momentum.
Key operating highlights:
Annual revenues up 9,0% to R27,345 million
Retail sales up 8,6% to R24,664 million
‘Same store’ sales increased by 7,4%
Adjusted EBITDA up 11,5% to R4,041 million
Retail sales climbed by 8,6% to R24,644 million, while average trading space increased 1.4% to 1.3 million m2. Same store sales grew a healthy 7,4% over the period. There was an improvement in almost all credit metrics with credit sales as a percentage of total retail sales increasing to 51% from 49% the prior year. Bad debts to average debtors improved significantly ending the year at 6.7%, from 10.9% the year before.
The strong revenue performance also translated into sound profitability with adjusted earnings before interest, taxes, depreciation and amortisation (EBITDA) increasing 11,5% to R4,041 million.
“Edcon delivered a solid financial performance as our customers responded positively to changes implemented during the year” said Edcon CEO Jürgen Schreiber.
Edcon today also announced its intention to sell its private label store card portfolio to Absa for approximately R10 billion and enter into a long-term strategic relationship for the provision of retail credit. The transaction represents an important component of Edcon’s strategic plan and will facilitate growth, both in South Africa and the rest of Africa, by allowing for a greater focus on core retail operations and providing a more efficient funding structure to grow credit sales.
“This relationship combines our leading retail franchise and marketing excellence with Absa’s exceptional funding strength and sound credit management,” commented Schreiber.
Schreiber stressed that credit will remain available across all of Edcon’s retail businesses as Edcon and Absa will balance continued growth of the credit book with appropriate credit quality.
During the year Edcon strengthened and upgraded its brand and property portfolio and initiated a 5 year store rollout program. It currently has stores in South Africa,Namibia, Bostwana, Lesotho, Swaziland and Zambia. In addition to the new real estate strategy, Edcon standardised its store model and has undergone a review of its approach to pricing. The Group also optimised its marketing program, improved its sourcing strategy and introduced a loyalty programme in February 2012.
Edgars Department Stores, which includes Edgars, Boardmans and Red Square, increased retail sales by 8,7% mainly due to the conversion of Discom outlets to Edgars Active stores. Like for like retail sales in this division grew by 4.9%. CNA’s sales climbed by 8,5%, 7.7% on a like for like basis, owing to growth in sales of mobile phones and digital products. Retail sales in the Discount division, including Jet, Jet Mart and Legit, increased by 8,4% despite Discom stores previously being included in the Discount division being converted to Edgars Active stores. The division’s strong performance is reflected in the like for like retail sales growth of 10.8% due to sales growth in ladies wear, kids wear and mobile phones.
Gross profit margin narrowed to 36,6% from 36,9% in the previous year, largely due to a combination of input price inflation tied to a weaker rand, as well as growth of lower margin cellular and digital products.
“We are cautiously optimistic about the year ahead and medium term fundamentals n the economy. We expect the momentum from initiatives started in the past year and our strategic relationship with Absa to bolster growth in the future,” Schreiber said.