Edcon set to slash jobs again

Edcon, South Africa’s largest clothing retailer, is to cut two-thirds of its 3 000-strong head office staff to reduce costs.
Edcon said last week that the retailer planned to slash the jobs in a bid to repay its bondholders and to save money.
The company announced that it was planning to reduce the headcount at its head office as part of a strategy to transform into a leaner organisation, so as to regain lost market share.
The planned job cuts come as the retail industry remains under pressure after the Reserve Bank continues to raise interest rates, decreasing consumers’ ability to spend.
Chito Siame, an equity analyst at Mergence Investment Managers, said: “The plan to cut jobs at Edcon head office are obviously part of an effort to improve profitability and provide some relief for the debt-laden company.
“They need to restructure debt or repay bondholders by 2019. I think a myriad of factors, including the debt, have shifted focus off of operations with the other apparel retailers benefiting in the form of market share. It’s more than likely that players, like Mr Price, will continue to benefit from market share losses at the retail giant.”
Insiders claim that the job cuts will affect Edcon’s subsidiaries Edgars, Jet and CNA.
In December, Edcon’s chief executive Bernie Brookes said the company was planning to reduce staff at the head office between February and March.
Last year the company improved its debt position after securing a repayment deal on R7.9 billion debt and access to R1.85 billion to pay down two bonds.
In November, Edcon reported a R1.1 billion loss; this figure was slightly less than the R1.3 billion reported a year earlier.
Ratings agencies added to Edcon’s woes last year when both Moody’s Investors Service and Standard & Poor’s cut its debt in December, placing the retailer further into junk territory and citing a poor outlook for consumer spending in the country.
After Morgan Stanley’s note, Edcon’s £425 million (R9.9 billion) bond due in 2019 plummeted to a price of just 47c, meaning the bonds were worth less than half of their face value.
The impeding job cuts are not the good news for the country where unemployment figures hover around 25.5%, according to the latest figure from Statistics SA.
The trade unions are monitoring the situation as this will probably affect their members.
Chris Gina, the deputy secretary of Southern African Clothing and Textile Workers’ Union, said Edcon’s stance would not go down well with the unions.
“It doesn’t matter whether the people who are going to lose their jobs are our members are not,” Gina said.
“We do not accept job retrenchment altogether.”
Edcon has retrenched 3 000 workers between 2013 and 2014, so the latest developments are not surprising.


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