Edcon reports strong sales and consistent earnings growth for the quarter ended 31 December
23 February 2012
Edcon achieved strong growth during the quarter ended 31 December 2011, further consolidating gains achieved earlier in the financial year.
Adjusted EBITDA up 13.3% to R1,546 million
Comparable "same store" sales grew by 10.5%
Continued strong cash flow generation from operating activities of R2,684 million
“Retail sales in South Africa continue to be resilient,” says Jürgen Schreiber, CEO of Edcon. “Pleasingly, sales growth in all our chains accelerated.” Total retail sales grew by 12.3% compared with the same quarter last year, with same stores sales rising a pleasing 10.5%. This was achieved by ensuring that stores were well stocked with key items and by cautiously offering credit to more credit worthy customers.
Edgars Department Stores Division, which includes Edgars, Boardmans and Red Square, increased retail sales by 13%, mainly due to strong growth from cellular products, childrenswear and footwear. CNA’s retail sales improved by 11.1%, driven by sales of cellular, digital and confectionary. The Discount Division, which includes Jet, Jet Mart, Legit and Discom, grew retail sales by 11.7% compared with the same quarter last year, primarily from a strong performance in cellular, footwear and ladieswear.
Edcon generated R2,684 million cash flow from operating activities following the higher profit growth and a lower investment in working capital. While working capital continued to be tightly managed across the group, inventory investments have been enhanced in order to ensure that stores remain in stock of key items.
Credit sales contributed 51% to total retail sales for the third quarter, up from 49% in the matching quarter last year. This growth was achieved by continued credit marketing efforts rather than a relaxation of credit granting criteria. The number of active accounts for the third quarter is 3.9 million compared with 3.8 million in the year before, mostly due to the increased marketing focus. The quality of the book continues to improve and strong collection activity saw consolidated annualised bad debts as a percentage of average debtors decrease to 7.1% from 11.6% for the same period last year.
As stated in the previous quarter, Edcon continues to invest in various transitional projects driven by the Chief Executive Officer, Jürgen Schreiber. These projects include a real estate expansion strategy to support the group’s growth, a strategic review of merchandise ranges and availability of goods, as well as an in depth review of operational processes across the business.
“All strategic initiatives are progressing well and they are certainly contributing to Edcon’s long term growth plan,” says Schreiber. “We are positive about growth prospects in the months ahead and we are certain that our transitional projects will bear fruit next year.”