Reports of Edcon on Brink of Collapse are “Sensationalist” says CEO
JOHANNESBURG – South African retailer Edcon – owner of well known outlets like Edgars, CNA and Jet – has asked shopping mall owners to give it a two-year 41 percent reduction in rent… in exchange for a small stake in the company, as it battles to survive, according to a Sunday Times report. Citing a […]
JOHANNESBURG – South African retailer Edcon – owner of well known outlets like Edgars, CNA and Jet – has asked shopping mall owners to give it a two-year 41 percent reduction in rent… in exchange for a small stake in the company, as it battles to survive, according to a Sunday Times report.
Citing a letter addressed to Edcon’s landlords, the Sunday Times reported that Edcon was seeking a two-year 41 percent “rent holiday” in exchange for a 5 percent share in the business.
The Sunday article claimed the company would likely have to liquidate if the deal is rejected… which would lead to the loss of 140,000 direct and indirect jobs.
However Edcon’s CEO says the news report is “sensationalist” and points out that “speculation and sensationalism will harm not help the company”.
Reacting to the newspaper report, Democratic Alliance (DA) leader Mmusi Maimane tweeted: “Bagaetsho (‘Brethren’ in Setswana), this is a tragedy.
“Many of us can remember friends, relatives, community mem who work at Edgars, CNA & Jet. This will be a major blow to our economy as an estimated 140k jobs could be lost. We must grow our economy at at least 5%, focus on ease of doing biz. We need reform.”
Edcon, which vies for market share with TFG , Truworths and international chains such as Zara and H&M, is one the biggest names in South African retail, employing more than 14,000 permanent full-time staff in over 1,100 stores, according to its website.
Edcon confirmed in a statement that it was in talks with some shopping mall owners about a proposal to reduce rents.
“This and other elements of a proposed agreement are in the final stages of resolution and no further commentary can be added at this stage,” it said.
However, Edcon CEO Grant Pattison took to Twitter to comment further.
Pattison said:
For the record when @SundayTimesZA asked us on comment late Friday, as they like to do, we said we can’t comment because the deal is not finalized. We ask them to wait a week so we could announce the signed deal. They refused.
He said the report that the company was close to collapse and could shut over 1,000 stores with thousands losing their jobs was “irresponsible and sensationalist reporting”.
He said “Edcon has been with this risk for some time. We are close to a deal to fix the business” and that it would soon be “announcing a complete recapitalisation of the business that should endure for the next few years”.
Edcon has been grappling with an over-leveraged capital structure for several years, after troubles in its credit business in 2014 coincided with an economic slowdown and weak consumer spending at home.
Bain Capital, which bought the 80 year old company more than a decade ago – in a highly leveraged deal – gave up equity control last year to creditors that included fund manger Franklin Templeton, local lenders Standard Bank and Absa.
Pattison said parts of the Sunday Times article, specifically its headline, “are unfortunately speculative, misleading and sensationalist. Edcon has not ‘crashed’. The Group had a great sales day yesterday (15 December 2018) with sales up on last year.”
Pattison also engaged with commenters on Twitter. One summed up the reaction by South Africans to the news: “We all love Edgar’s – we grew up with the brand, it’s emotional.”
Many said they had noticed an improvement in stores recently, but – said one – “honestly the top structure is still bloated, if that can be cut back, millions can be saved… Please save this Company.”
Pattison replied: “Will do our best.”
He also thanked everyone for their encouragement and said: “We are all working very hard. Particular thanks to the employees in the stores. They are doing an amazing job.”
(Reporting by Tiisetso Motsoeneng/Reuters and Jenni Baxter/SAPeople; Editing by Elaine Hardcastle/Reuters and Jenni Baxter/SAPeople)
Bagaetsho, this is a tragedy. Many of us can remember friends, relatives, community mem who work at Edgars, CNA &Jet. This will be a major blow to our economy as an estimated 140k jobs could be lost. We must grow our economy at atleast 5%,focus on ease of doing biz.We need reform pic.twitter.com/ikUd08BkhW
— Mmusi Maimane (@MmusiMaimane) December 16, 2018
Edcon is very close to announcing a complete recapitalisation of the business that should endure for the next few years. We cannot comment on the details as it is not yet finalized. Speculation and sensationalism will harm not help the company.
— Grant Pattison (@GrantPattison) December 16, 2018